IRA Charitable Distribution
A tax-wise giving opporunity for IRA owners
Donors 70 ½ or older can make a tax-wise gift directly from your IRA to a qualified charitable organization. This gift opportunity is known as the Qualified Charitable Distribution (QCD), and it can have a real impact here at End of Life Choices New York.
This opportunity is appealing to many because the IRA distribution does not come to you the taxpayer, so it avoids unnecessarily increasing your taxable income. In addition, the charitable distribution may qualify as part or all of your annual Required Minimum Distribution (RMD), which is the annual withdrawal that you are required to take when you reach a specific age.
- Donors who are eligible must be age 70 ½ or older on the date of the gift.
- The distribution counts towards your Required Minimum Distributions, which is a distribution that IRA owners must take at age:
- 70 ½ if you turned this age on or before December 31, 2019.
- 72 if you turn this age on or after January 1, 2020.
- Gifts up to $100,000 per individual taxpayer are eligible per tax year.
- Distributions must be made (1) directly from the trustee (2) directly to the qualified charity.
- The gift must be complete by December 31 of the calendar year in which the Qualified Charitable Distribution is being made.
- You pay no income taxes on this gift. Since this charitable distribution generates neither taxable income nor a tax deduction, you benefit even if you do not itemize your deductions.
- By lowering your reported annual income, you may find that this helps lower Medicare premiums and may decrease Social Security that is subject to tax.
- The Qualified Charitable Distribution (QCD) qualifies toward the owner’s Required Minimum Distribution.
- Is there a charitable tax deduction? There is not. The Qualified Charitable Distribution (QCD) allows the IRA owner to avoid paying income taxes that were deferred when the funds were initially deposited into the IRA. Normally, withdrawals from IRA’s are subject to income tax. However, Qualified Charitable Distributions (QCD’s) from IRA accounts are not considered taxable income to the donor; therefore, these gifts do not qualify as tax deductions.
- Gifts can NOT be made from 401(k) or 403(b) or other employer-sponsored retirement accounts. However, it may be possible to complete a tax-free transfer from these employer-sponsored retirement accounts into an IRA from which a charitable distribution may be made.
- Qualified Charitable Distributions (QCD) can NOT be used to establish Charitable Remainder Trusts, Charitable Gift Annuities or Donor Advised Funds.
Video Guide to IRA Qualified Charitable Distributions
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Thank you for considering this gift!
The gift descriptions are for informational purposes and are not legal or tax advice. To ensure that this gift fits your particular circumstances and planning, please consult with your professional advisers.