Qualified Charitable Distributions (QCD)
When planning your IRA withdrawal strategy, you may want to consider making charitable donations through a QCD.

A QCD is a direct transfer of funds from your IRA custodian, payable to a qualified charity. QCDs can be counted toward satisfying your required minimum distributions (RMDs) for the year, as long as certain rules are met.

In addition to the benefits of giving to charity, 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.

Also, QCDs don’t require that you itemize, which due to the recent tax law changes, means you may decide to take advantage of the higher standard deduction, but still use a QCD for charitable giving.

Can I make a QCD?

While many IRAs are eligible for a QCD—Traditional, Rollover, Inherited, SEP (inactive plans), and SIMPLE (inactive plans) —there are requirements:

• You must be 70½ or older to be eligible to make a QCD.

• QCDs are limited to the amount that would otherwise be taxed as ordinary income.

• The maximum annual QCD amount is $105,000 (index adjusted annually). This applies to the sum of QCDs made to one or more charities in a calendar year. If, however, you file taxes jointly, your spouse can also make a QCD from his or her own IRA within the same tax year for up to $105,000.

• For a QCD to count towards your current year’s RMD, the funds must come out of your IRA by your RMD deadline, generally December 31.

• Contributing to an IRA may result in a reduction of the QCD amount you can deduct. (The aggregate amount of deductible IRA contributions you make to your IRA after you turn 70 1/2 will reduce the amount of the QCD that is not includible in your gross income.)

Any amount donated above your RMD does not count toward satisfying a future year’s RMD.

Funds distributed directly to you, the IRA owner, and which you then give to charity do not qualify as a QCD.

How to set up a QCD

Any IRA owner who wishes to make a QCD should contact their IRA trustee so the trustee will have time to complete the transaction before the end of the year.

Normally, distributions from a traditional individual retirement arrangement (IRA) are taxable when received. With a QCD, however, these distributions become tax-free as long as they’re paid directly from the IRA to an eligible charitable organization.

QCDs can be made electronically, directly to the charity, or by check payable to the charity.

An IRA distribution, such as an electronic payment made directly to the IRA owner, does not count as a QCD. Likewise, a check made payable to the IRA owner is not a QCD.

Each year, an IRA owner age 70½ or over can exclude from gross income up to $105,000 of these QCDs. For a married couple, if both spouses are age 70½ or over and both have IRAs, each spouse can exclude up to $105,000 for a total of up to $210,000 per year.

The QCD option is available regardless of whether an eligible IRA owner itemizes deductions on schedule A. Transferred amounts are not taxable, and no deduction is available for the transfer.

Tax reporting

A QCD is reported as a normal distribution on IRS Form 1099-R for any non-Inherited IRAs. For Inherited IRAs or Inherited Roth IRAs, the QCD will be reported as a death distribution. Itemization is not required to make a QCD. While the QCD amount is not taxed, you may not then claim the distribution as a charitable tax deduction.

A QCD is not subject to withholding. State tax rules may vary, so for guidance, consult a tax advisor.

When making a QCD, you must receive the same type of acknowledgement of the donation that you would need to claim a deduction for a charitable contribution.

A tax advisor can help you determine if both your IRA and charity qualify for QCDs.

The Community Foundation of Warren County gladly accepts QCD gifts to existing funds or to establish a fund. We are here to help you with any questions you may have. Please stop into our office at 310 Second Avenue in Warren, call us at (814) 726-9553, email us at cfwc@westpa.net, or visit our website at cfowc.org.

For Good…Forever

To learn more please contact:
Mark A. King
(814) 726-9553
cfwc@westpa.net
Community Foundation of Warren County,
310 Second Avenue, Warren, PA 16365
Qualified charitable distributions are not eligible for a charitable tax deduction since they are exempt from income tax. Please consult your tax advisor to confirm how you would benefit from this opportunity.