A qualified charitable distribution (QCD) allows individuals who are 70½ years old or older to donate to one or more charities directly from a taxable IRA or other qualified retirement plans.
Why It Matters To You
This income increase could potentially push the taxpayer into a higher income tax bracket. It can also trigger phaseouts, which limit or eliminate some kinds of tax deductions, such as personal exemption and itemized deductions, and sometimes trigger high taxes on Social Security income.
How A Qualified Charitable Distribution Works
QCDs are also called IRA charitable distributions or IRA charitable rollovers. They enable individuals to fulfill their required minimum distribution by directly transferring up to $100,000 to charity.
Making A Qualified Charitable Distribution
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, execution must occur by the same deadline as a normal distribution, usually on
Dec 31 of the tax year in question.
"Ask before gifting; not all charities are IRS approved."
What kind of charities qualify?
The charity must be a 501(c)(3) organization, eligible for tax-deductible contributions.
Some 501 (c)(3) 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
In addition, donors cannot benefit from making a qualified distribution to a charity. So, for example, a QCD cannot be used to purchase something in a charity auction or purchase tickets for a charity golf tournament.
State tax rules on QCDs vary, so donors using charitable distributions should consult a tax advisor to understand the impact on state tax liabilities.
"Living Grace Canine Ranch is an IRS approved charity."
Does a QCD Make Sense for You?
A QCD can provide several potential benefits. It may be a suitable giving strategy for donors who:
Are required to take a minimum distribution from an IRA but don't need the funds and would face increased tax liabilities if they took the distribution as income.
Would like to reduce the balance in an IRA to lower future required minimum distributions.
They would like to make a more significant charitable gift than they could if they donated cash or other assets.
Do not wish to make their contribution to a foundation or donor-advised fund.
Have identified which charities they want to support immediately with a substantial gift.
When might a qualified distribution not be effective?
Although qualified charitable distributions can be a good option in the right circumstances, they may not be the best charitable giving strategy. For example, if you have securities that have grown in value since you bought them, it may make more sense and provide a more significant tax benefit to donate them to charity instead of taking a QCD.
Psst…LGCR Accepts Publicly Traded Securities
(Stocks, Bonds & Treasury Notes)
Additionally, if you prefer to take a tax deduction in the current year and then support charities over time, as you can when you contribute to a donor-advised fund, a QCD may not be the right option.
Suppose you are considering a meaningful charitable donation. In that case, a CPA or financial advisor can help you minimize your tax liability and maximize the value and impact of your gift by choosing the right strategy or combination of methods for your situation.
How To Make A Qualified Charitable Distribution
The deadline for 2021 required minimum distribution is quickly approaching. Contact your investment firm and provide the following information.
Recipient Name
Living Grace Canine Ranch
Mailing Address
723 West University Avenue, Suite 110 - 142
Georgetown, Texas 78626
IRS Status
501 (c) (3) [IRS Determination Letter is available upon request]
Federal Tax Identification Number [EIN]
84-4824464
Thank you for supporting LGCR's charitable work of saving, serving, and providing life quality for disadvantaged Texas senior dogs.
If you need further assistance or desire to gift LGCR with securities, we are here to help. Email: gifts@livinggracecanineranch.org
The information provided here is not tax or legal advice. Donors and potential donors should consult with a qualified tax advisor regarding their specific circumstances, the tax and nontax considerations, and the consequences associated with the gift described in this document.