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October 2019 E-Newsletter: Qualified Charitable Distributions

Provided by Gardey Financial Advisors

Qualified Charitable Distributions

When you reach age 70½, there can be a new way of giving.

As the owner of a traditional IRA, you are likely aware that you are obligated to make required minimum distributions (RMDs) once you reach age 70½. However, you may not be aware that the RMD can be taken in the form of a qualified charitable distribution (QCD), where a qualified charity receives all or part of your RMD, satisfying your obligation and offering a potential tax advantage. (Withdrawals from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.) 1

Naturally, there are a few rules. First, you can only make a QCD after you reach age 70½. So, if your 70th birthday takes place January 17, you are not going to be able to make the qualified charitable distribution until July 17, six months later.1

Keep in mind there is a QCD cap of $100,000 per individual per year. You can donate more if you want, but the overage may not have any tax benefits.1

To qualify to receive a QCD, the charity must be a 501(c) 3 organization. Most charities are 501(c) 3 organizations, but you should first verify the charity’s status. You must also make your distribution check payable directly to the charity in question, as opposed to a director or another individual in the organization. If you make the check out to the director or another individual in the organization instead of the charity itself the distribution would be considered a taxable distribution.1

Would you be able to split your IRA distribution in half, giving half or part to the qualified charity and the remainder as a regular RMD? Yes, you can split your IRA distribution. You would perform them as separate actions so as long as they add up to the necessary RMD.  

How should you report a QCD on your taxes? There is a section on Form 1040 for reporting IRA distributions. Regular RMDs are taxable events, but for qualified charitable distributions, you would enter 0 (zero) for the taxable amount (assuming that the full amount qualified) and enter “QCD” next to the line.2  

If you are interested in supporting a charity, a qualified charitable distribution may be a good option for you to consider. Talk with your financial or tax professional about your options.  

Keep in mind, this article is for informational purposes only and is not a replacement for professional advice. Always consult your tax or legal professional before modifying your charitable giving strategy.


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1 investopedia.com/articles/financial-advisors/032116/how-use-qcd-rule-reduce-your-taxes.asp/ [12/10/18]

2 irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals [5/30/18]