What is a Qualified Charitable Distribution (QCD)?
How can a QCD make you a better steward of gifts to CLC or other not-for-profits

A QCD allows those who are 70½ years or older to donate up to $100,000 total to one or more charities directly from a taxable IRA instead of taking their required minimum distributions (RMD). Donors may avoid being pushed into higher income tax brackets and prevent phaseouts of other tax deductions, though there are some other limitations.

How QCDs Work

People who hold Individual Retirement Accounts (IRAs) are required to take RMDs (Required Minimum Distributions) each year beginning at age 72 - even if they don’t need or want the funds. That same RMD increases the IRA holder’s total taxable income. This income increase could push the taxpayer into a higher income tax bracket.

QCDs enable individuals to fulfill their RMD responsibility by a direct transfer of up to $100,000 to charity, like CLC. They can also be used to support multiple charities, if the sum total of the distributions is within the $100,000 limit. Because QCDs don’t increase taxable income, both higher tax rates and phaseouts can be avoided

How QCDs are Made

QCDs can be made directly to CLC from a traditional IRA, inherited IRA, inactive Simplified Employee Pension (SEP) plan, or inactive Savings Incentive Match Plan for Employees (SIMPLE) IRAs.

The money is a direct transfer that never passes through the hands of the IRA holder. Instead, the IRA custodian can either send a check directly to the charity or the account owner, who then hands it over to the charity.

For a QCD to count toward your minimum annual IRA distribution, it must be made by the same deadline as a normal distribution, usually Dec. 31 of the tax year in question.

If you are considering a larger charitable donation, a CPA or financial advisor can help you minimize your tax liability and maximize the impact of your gift by choosing the right strategy or combination of strategies for your situation.

Give CLC a Call

If you have questions or need assistance with a QCD, feel free to call our Treasurer, Hank Miles, or your financial advisor. The office number is 615-370-5020.