If you are 70.5 or older you can give up to $100,000 to charity directly from your IRA without counting the distribution as taxable income and it can be used to satisfy your “Required Minimum Distribution” (RMD). It’s an excellent way to make the most of your charitable giving.
Benefits of the IRA Qualitifed Charitable Distribution:
- The Qualitifed Charitable Distribution permits you to make donations to charitable organizations such as the Interfaith Food Pantry from your IRA without counting the distribution as part of your adjusted gross income (AGI) and, consequently, without paying taxes on it.
- You won’t recognize the distribution as income for federal tax purposes.
- The distribution would count toward your required minimum distribution (RMD) for the year.
- You must be at least 70 1/2 years old and required to make an annual distribution from your IRA.
- Your total combined IRA QCD donation cannot exceed $100,000 in any one year.
- Charitable contributions from an IRA must go directly to a public charity that is not a supporting organization. Contributions to donor-advised funds and private foundations, except in narrow circumstances, do not qualify for tax-free IRA QCDs.
- Distributions can only be made from traditional IRAs or Roth IRAs. Charitable donations from 403(b) plans, 401(k) plans, pension plans, and other retirement plans are ineligible for the tax-free treatment.
- You cannot receive any goods or services in return for your IRA Charitable Rollover donation in order to qualify for the tax-free treatment.
- You must receive an acknowledgement from the Interfaith Food Pantry or other charity donated to for each rollover contribution with the specific language required by the IRS included, stipulating your intentions.
We strongly recommend that you seek the advice of your financial advisers prior to making an IRA QCD, as personal circumstances can have a significant mpact on whether such a contribution would be advantageous to you.
FREQUENTLY ASKED QUESTIONS
What is the minimum age for making a Qualified Charitable Distribution
You must turn 70-1/2 prior to completing the distribution.
If I make a Charitable IRA Rollover donation, does it affect my required minimum distribution (RMD)?
The amount distributed to Interfaith Food Pantry will be deducted from your RMD.
Is there a tax deduction for making a Qualified Charitable Distribution?
QCD gifts are not deductible – but the money is never included in your income in the first place, which for many people is more favorable than a deduction.
I have a Roth IRA. Can I use it for a Qualified Charitable Distribution?
Roth IRAs are eligible for QCD treatment; however, you may wish to discuss with your financial advisor whether this is the best way for you to give.
I don’t have an IRA. Can I make a Qualified Charitable Distribution from another type of retirement account?
No, transfers must come directly from an IRA or Roth IRA. However, if you have retirement assets in a 401(k), 403(b), etc., you may be able to roll those funds into an IRA, then use the IRA for giving. Please discuss this with your financial advisor.
What is the minimum gift amount? Is there a maximum gift amount?
The minimum gift size depends on the policies of your IRA custodian. The maximum distribution permitted by the IRS is $100,000, per account holder (i.e., per spouse), per year.
Are there any restrictions on the Qualified Charitable Distribution?
A QCD cannot be used to make gifts when the donor receives a benefit in return (i.e., to attend a dinner).
How do I initiate a QCD?
In most cases, you should start by contacting your IRA custodian. If you have an IRA with check-writing features, please be aware that your check must be made out to “Interfaith Food Pantry” and must clear your account by December 31 to count toward your RMD.
When should I initiate a request for a distribution?
You may request a distribution at any time during the year. If you intend that your distribution count toward your RMD, please begin your transfer by early December to allow ample time for your transfer to be completed.
How do I initiate a QCD?
Contact your IRA custodian.
What type of acknowledgement should I expect?
We will send you a written acknowledgement of your gift to thank you and to confirm the amount of your gift. Because there is no income tax deduction, you will not receive a conventional receipt.
How do I know if a QCD is right for me?
If you are over age 70-1/2 and have an IRA, the rollover might be right for you if:
- You do not itemize deductions
- You don’t need your required minimum distribution (RMD)
- Your RMD causes more of your Social Security income to be taxed
- You are making charitable contributions at your deduction limit, but would like to do more
I have more questions. Whom should I contact?
Click here for a great article from Forbes.com describing the benefits of a QCD.