'Qualified Charitable Distribution'

[eherscher]

How do I set up a  'Qualified Charitable Distribution' ? What information do I need? 

[carolineb]

Hello @eherscher ,

A Qualified Charitable Distribution (“QCD”) can be a very effective and tax-efficient way to donate to your favorite charity from your IRA.  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:

• 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. This excludes non-deductible contributions.
• The maximum annual amount that can qualify for a QCD is $100,000. 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 $100,000.)
• 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.)

Have you recently found out you are eligible to make a QCD from your IRA?  In addition to giving to your favorite charity, being eligible for a QCD includes these benefits:

• Satisfying your required minimum distribution obligation for the year.
• Not having to itemize your tax deductions.
• A QCD also excludes the amount donated from taxable income which can reduce the impact of certain tax credits and deductions, like Social Security and Medicare.

What kind of charities qualify?

• The charity must be a 501(c)(3) organization, eligible to receive tax-deductible contributions.

Some charities do not qualify for QCDs:

• Private foundations
• Supporting organizations: i.e., charities carrying out exempt purposes by supporting other exempt organizations, usually other public charities
• Donor-advised funds, which public charities manage on behalf of organizations, families, or individuals

If you are eligible, there is a procedure to follow to ensure your QCD is processed correctly. Not sure where to start? Here is the typical step-by-step process for making a QCD:

1. Communicate with your IRA’s custodian (where your IRA is held) that you are interested in making a QCD(s).
2. Make the request for a QCD(s) in writing.
3. Specify the dollar amount that you wish to contribute to each individual charity.
4. Request the check be made payable to the charity(ies) but be mailed to you.
5. Forward the check to the charity(ies) and request a receipt for your records.
6. Maintain the receipt(s) and records in your tax file.
7. Report the QCD amount on your 1040 federal tax return.
8. Enter the total amount(s) on line 4a of your 1040 federal tax return.