What are Qualified Charitable Distributions?
Qualified Charitable Distributions (QCDs), also known as IRA Charitable Rollovers, are the savviest way for individuals age 70½ or older to use their IRAs to maximize their charitable impact to United Through Reading.
This is because they can be donated to a qualified nonprofit organization without first recognizing it as income.
Up to $100,000 in IRA funds can be counted as QCDs annually or $200,000 for married couples.
What are the benefits of QCDs?
QCDs reduce your taxable income
Typically, funds that are withdrawn from a Traditional IRA count toward your annual income, which will increase your overall tax burden. In some cases, this increase may also move you into a higher tax bracket.
However, QCDs are an exception to this rule—funds go directly from your IRA to your chosen charitable organization without needing to be withdrawn, thereby helping you avoid higher income taxes.
QCDs satisfy Required Minimum Distributions
Required Minimum Distributions (RMDs) are amounts you must withdraw annually from your Traditional IRA once you reach a certain age. As of Jan 1, 2020, this age is 72.*
If you do not withdraw your RMD, you will face a penalty tax of 50% of the required withdrawal amount. QCDs can be used to meet this RMD requirement and avoid penalties.
*If you were at least 70½ years old before Jan 1, 2020, you are still required to take out your RMD, even if you are not yet 72.
Read more about RMDs on the IRS website
QCDs maximize your charitable impact
Because QCDs do not need to be recognized as income, charitable organizations receive the total amount of the transfer tax-free.
It’s a win-win situation that both supports you and United Through Reading.
How do I get started?
If you have more questions about making a Qualified Charitable Distribution from your IRA, please talk to your financial custodian or contact our Advancement Team at 858.481.READ(7323) or giving@utr.org.
*The foregoing information is general and educational in nature and does not take into consideration your personal circumstances or other factors that may be important in making tax and investment decisions.
