My IRA is with a large brokerage company. If I want to use my part of RMD for a contribution to a charity, do I take the cash and send it to the charity or does the brokerage company send it to the charity?
By doing this, I understand that I don't have to pay federal and state income taxes on the RMD amount that I donate to the charity. Is my understanding correct?
Thank you.
To qualify as a QCD, the funds must be sent directly from the IRA custodian to the charity. If paid to you first, it would not qualify as a QCD, would not be excludible from your AGI and you would have to claim it as a charitable deduction on Schedule A instead.
Note that some IRA custodians will make the check payable to the charity, then mail the check to you for you to forward to the charity. This still meets the requirement that the payment be made directly to the charity because the check is not payable to you, only the charity can cash the check.
Check with your brokerage company. I just did one from my Vanguard IRA today. If you are the right age to make a QCD you select a check to the Charity. I had to enter what funds to sell it from. Vanguard sends me the check made out to the charity care of my name. I then have to mail the check to the charity. Be sure to get an acknowledgment letter from the charity as backup to deduct it from your taxes.
To qualify as a QCD, the funds must be sent directly from the IRA custodian to the charity. If paid to you first, it would not qualify as a QCD, would not be excludible from your AGI and you would have to claim it as a charitable deduction on Schedule A instead.
Note that some IRA custodians will make the check payable to the charity, then mail the check to you for you to forward to the charity. This still meets the requirement that the payment be made directly to the charity because the check is not payable to you, only the charity can cash the check.
What you are asking about is a Qualified Charitable Distribution, or QCD. The post by dmertz above outlines the federal requirements.
A deduction for a charitable contribution on Schedule A does not give you any tax benefit unless you itemize deductions. Even if you do itemize, the tax benefit of the deduction is not quite the same as a QCD because a QCD is not included in your AGI. Itemized deductions are only subtracted after your AGI is calculated. If you don't itemize (you take the standard deduction) you get no tax benefit at all if it's not a QCD.
Every state has its own rules. Some states will tax the full amount that you take out of your IRA, even if some of it is a QCD and is free of federal tax. Some states will not tax the QCD amount. You have to check the rules for your particular state.
As others have said, your broker must make out the check (or send the money directly) to the charity. A "large brokerage company" will have a form for taking a QCD (Qualified Charitable Distribution). At my broker, they use the regular IRA distribution form, but you check a box for a QCD.
Here's info for Vanguard How to take a QCD
https://investor.vanguard.com/investor-resources-education/faqs/how-do-i-take-a-qualified-charitable-distribution-qcd