Qualified charitable distributions (QCDs) from IRAs—Clients age 70½ or older are permitted to distribute up to $100,000, including the required minimum distribution (RMD) amount, and have it transferred directly to a qualified charity. The distribution is tax-free, although no income tax deduction is allowed. This is a great way for clients with RMDs to avoid the necessity of receiving a “taxable” distribution.
Qualified Charitable Distribution FAQ
What is a QCD?
QCD stands for Qualified Charitable Distribution. It is a distribution from an IRA transferred directly to a qualified 501c3 charity. The distribution is not included in the IRA owner’s taxable income.
Who is allowed a QCD?
Only IRA owners aged 70.5 and older.
Can a QCD be used to satisfy a RMD?
How much can be contributed to a charity via QCD?
$100,000, per person (not per IRA), per year. A married couple could contribute up to $200,000 through this rule.
Why is the QCD particularly beneficial starting in 2018?
With the increased standard deduction as part of the new tax law changes, it is likely less taxpayers will be itemizing deductions. The QCD reduces the amount of taxable income and thus creates more tax savings for those using the standard deduction. Reduced income also may lead to reduced Medicare premiums and reduced taxation of Social Security benefits.
Can a QCD be made from a 401k or other ERISA retirement plan?
No, a QCD can only be made from an IRA.
Can a QCD be transferred to a donor advised fund or other foundation?
No, a QCD must be transferred directly from the IRA custodian to the 501c3 charity.
Are QCDs reported on the 1099 at the end of the tax year?
No, there is no special designation for the QCD on the 1099 form. It is very important that the tax preparer know how to document the QCD on the 1040 tax return in order to make sure it is properly reported to the IRS.
How do I make a QCD?
Contact us and we will walk you through the process. We will need the name and address of the charity and your signature guaranteed on a QCD distribution form.
From the desk of Mike JetteRetirement, Social Security, Tax Planning