A Brief Guide to Qualified Charitable Distributions

//A Brief Guide to Qualified Charitable Distributions
A Brief Guide to Qualified Charitable Distributions2021-04-30T11:31:45-04:00

What are Qualified Charitable Distributions

Qualified Charitable Distributions (QCDs) are funds from your Individual Retirement Account (IRA) that can be donated to a qualified nonprofit organization without first recognizing it as income.

QCDs are also sometimes referred to as IRA Charitable Rollovers.

Up to $100,000 in IRA funds can be counted as QCDs annually, or $200,000 for married couples.

Who is eligible?

If you are above the age of 70.5 and have a Traditional IRA, you are eligible to make a QCD.

What are the benefits?

QCDs reduce your taxable income

Normally, funds that are withdrawn from a Traditional IRA count toward your annual income, which will increase your overall tax burden. In some cases, this increase may also move you into a higher tax bracket.

However, QCDs are an exception to this rule—funds go directly from your IRA to your chosen charitable organization without needing to be withdrawn, thereby helping you avoid higher income taxes.

QCDs satisfy Required Minimum Distributions

Required Minimum Distributions (RMDs) are amounts that you must withdraw annually from your Traditional IRA once you reach a certain age. As of Jan. 1, 2020, this age is 72.*

If you do not withdraw your RMD, you will face a penalty tax of 50% of the required withdrawal amount. QCDs can be used to meet this RMD requirement and avoid penalties.

*If you were at least 70.5 years old before Jan 1, 2020, you are still required to take out your RMD, even if you are not yet 72.

QCDs maximize your charitable impact

Because QCDs do not need to be recognized as income, charitable organizations receive the full amount of the transfer tax-free.

It’s a win-win situation that both supports you and the causes you care about.

To Get Started

Contact your financial advisor today and tell them you want to save the lives of homeless animals by making a donation to North Shore Animal League America as your Qualified Charitable Distribution. If you have any questions contact the Gift Planning office at Animal League America by phone at 516-373-3635 or by email [email protected].