Making a qualified charitable distribution from your IRA account can happen any time of year to support your favorite qualified charity or charities.
For anyone aged 72 and older, there is a Required Minimum Distribution (RMD) that must be taken each year. If you have a traditional IRA, taxes will be owed on distribution from the IRA, unless given to charity. A simple conversation with your IRA manager and the completion of a form can turn your RMD into a Qualified Charitable Distribution (QCD). If you do not need some or all of your RMD, make a gift to your favorite charity, and that portion of your distribution is tax-free.
You can also talk with your IRA manager about making a charity a beneficiary of your IRA. Complete a beneficiary designation form identifying a charity as your primary or secondary beneficiary. If you have more than one charity you would like to be recognized in this way, help is available. If you would like, let the charity or charities know you have left this future gift.
Starting at the age of 70½, an individual can make a QCD from their IRA account up to $100,000. The individual does not pay taxes on a QCD. The QCD, although considered an IRA distribution, does not increase the individual’s annual income, and the QCD may lower future Required Minimum Distributions. Talk with your tax professional to see if this is a good strategy for charitable giving. The best benefit: feeling the joy of giving to your favorite charity or charities.
There are a few requirements and restrictions when making a QCD. The Qualified Charitable Distribution must go directly to the charity, it cannot come to the IRA owner first. Qualified Charitable Distributions cannot be made to a donor advised fund. QCDs must be received by a qualified charity no later than Dec. 31 to qualify for a deduction during the current tax year. Let the charity know that you have made this gift and if you plan to designate the funds for a specific program (designated gift) or if you will allow the charity to decide how best to use your gift (unrestricted gift). Either way, your gift will make a great impact.
Having a charitable spirit can be represented in many ways. Using an IRA is just one, and it could have tax benefits. Please speak with your tax professional; the information contained in this article is not intended as tax advice and is not a substitute for tax advice. QCBN
By Lisa Sahady
Lisa Sahady is the regional director for the Arizona Community Foundation of Yavapai County. Since 2016, she has helped increase ACF of Yavapai County’s asset base by building relationships with professional advisors, individual donors and non-profit organizations. She received her Certified Gift Planning Professional designation through Crescendo’s Gift College for complex estate planning. She can be reached at lsahady@azfoundation.org.
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