One of the biggest challenges that successful individuals face is understanding how they can share their wealth to make a positive impact on others. Many who have considerable wealth are interested in charitable giving to ensure they leave a legacy behind that will make the world a better place.
If you are planning to give to charity, it is important to develop a charitable giving strategy that can optimize the value of your gifts. One effective way of doing so might be to make the donations from your IRA through a Qualified Charitable Distribution (QCD).
What is a Qualified Charitable Distribution?
A Qualified Charitable Distribution (QCD) is generally a nontaxable distribution made from an IRA (other than a SEP IRA or SIMPLE IRA) directly to a qualified charity.
Can I make a QCD?
There are some special rules that you need to be aware of before making a QCD.
- You must be 70 ½ years of age or older when the distribution is made.
- The distribution must be made directly from your IRA to a qualified charity. SEP and SIMPLE IRAs may be ineligible for QCDs.
- The charitable organization must meet section 501(c)(3) requirements as listed in the U.S. Internal Revenue Code (IRC).
- The maximum annual amount eligible for QCDs is $100,000 per person. Any amount distributed above this limit may be subject to income taxes as any other IRA distribution.
- The QCD must be made prior to the RMD deadline, which is typically December 31.
Opportunities
There can be tax benefits for individuals willing to take advantage of QCDs. Donors can lower taxable income while satisfying all or part of the current year’s annual required minimum distribution (RMD) amount. In turn, these gifts can help reduce the amount of RMDs that would otherwise be counted as income subject to taxes.
Conclusion
QCDs are an effective strategy for gifting required distributions directly from your IRA to a qualified charity. Our financial professionals can work with you to determine how these advantages may apply to your specific situation. We invite you to contact us today to learn more about how we can help to develop a plan to meet your charitable giving objectives in the most tax efficient way.