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John Burnside

Qualified Charitable Distributions (QCDs)

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Qualified Charitable Distributions (QCDs)

Changes in the new tax law (Tax Cuts and Jobs Act of 2017) means it’s less likely you can deduct donations to charity from your taxes.

 

However, the federal government still allows for Qualified Charitable Distributions (QCDs).

 

A QCD is a distribution of funds from your IRA account, payable to a qualified 501(c)(3) charity. If certain rules are met, QCDs can be counted toward satisfying your required minimum distribution (RMD).

 

Benefits

  • A QCD excludes the amount donated from taxable income, which is unlike regular withdrawals from an IRA.
  • Keeping your taxable income lower may reduce the impact to certain tax credits and deductions, including Social Security and Medicare.

Rules

  • You must be 70½ or older
  • The maximum annual amount that can qualify for a QCD is $100,000.
  • IRA donations must go directly from the account to the charity. Typically the custodian submits them to the charity or else sends checks made out to the charity to the IRA owner, who sends them on. The distribution can't go to a private foundation nor a donor advised fund.

Tax Tip

You'll receive Form 1099-R reporting the distribution, but the form does not specify that it was a tax-free transfer to charity. If you work with a tax preparer, it's important to let him or her know that it was a qualified charitable distribution so you don't end up paying taxes on the amount.

 

Operations

An IRA distribution form will have a "Method of Payment" section where you complete the charity's name and address.

 

 

IRA Distribution Form

 

 

Disclaimer

If legal, tax, or other professional advice is required, the services of a competent professional should be sought. This post should not be considered investment advice. This information is subject to change and/or be edited. Past performance is not a guarantee of future results.

 

qcdWithdrawalFormSnapshot.jpg

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