What is a Qualified Charitable Distribution (QCD)? A QCD is a non-taxable withdrawal from your retirement account that is paid directly from the IRA to a qualified charity. You would not claim the distribution as income or pay income tax on it. These contributions can be made to an endowment fund, or passed through to a church, school, religious order, or charity.
If you are over the age of 70½ years, the federal government allows you to donate distributions directly from your traditional IRA to a qualifying charitable organization. These tax-free gifts can be up to $100,000 for any given calendar year.
Why would I donate my required distribution?
A QCD allows you to donate to a charity tax-free rather than pay income tax on the money you are already required to withdraw from your traditional IRA. This generally benefits donors who itemize their deductions and whose charitable contributions are reduced by the IRS percentage of income limitation. Donating to a qualified charity fulfills your Required Minimum Distribution (RMD), avoids paying income tax, and provides a significant gift to support a charitable cause important to you.
What are the requirements to make a QCD?
A QCD gift can be made as long as the donor meets specific guidelines provided by the IRS.
- The donor must be 70½ years of age or older.
- The distribution must be transferred directly from your traditional IRA to a qualified charitable organization.
- Each individual in a married couple can donate up to $100,000 from individual IRA accounts per calendar year.
- The charitable distribution is not eligible for a charitable income tax deduction.
What are the benefits of a QCD?
A QCD helps you avoid paying income tax on a Required Minimum Distribution from your traditional IRA. You are able to make a gift to your local parish, school, or Catholic organization by donating your RMD to charity. Rather than pay income tax on the RMD from your traditional IRA, you can donate the RMD to charity tax-free or establish a new fund at The Catholic Foundation with a gift up to $100,000.
Another benefit of a QCD is the ability to create a legacy gift in your family’s name that would continue to give back to a parish or school or your choice in perpetuity. A gift like this could outlive you!
In Closing
Making a Qualified Charitable Distribution from your traditional IRA has many benefits. It allows you to avoid paying income tax on the required distributions from your IRA account. A QCD allows you to make generous charitable contributions to a fund or organization of your choice.
For more information on Qualified Charitable Distributions, consult with your tax advisor or your IRA administrator to learn more. You can also contact The Catholic Foundation of Southern Nebraska at 402-488-2142.
Here at The Catholic Foundation of Southern Nebraska, we want to help you give charitably, in a way that is meaningful to you. We work with individuals, couples, and families who want to personally make a difference in the lives of others. If you’re interested in learning more, please don’t hesitate to reach out!