Qualified Charitable Distributions (QCDs): The Basics

Black and white photo of five peoples forearms all fist bumping to illustrate the effect Qualified Charitable Distributions (QCDs) has on a community.

Let’s talk about Qualified Charitable Distributions, more commonly known as QCDs. Picture this: you’re enjoying your well-deserved retirement, you’ve done well saving, and you realize that you’ve got a nest egg tucked away in your Individual Retirement Account (IRA). You’re a generous soul and want to support the charities that mean a lot to you, but you’re also wondering the best way to do so. That’s when QCDs come into the equation.

What Are QCDs?

Here’s the short and sweet of it: a Qualified Charitable Distribution (QCD) allows you to give back to the community and support the causes you love while relieving your tax burden. It’s like getting a two-for-one deal for your good deeds and finances!

How Do QCDs Work?

First, you have to turn 70 a half according to the IRS. Then you are able to transfer money directly from your traditional IRA to a qualified charity of your choice. This distribution is then given directly to the charity with no taxes paid. Further, it doesn’t count as taxable income for you!

Are there any rules?

Yes, here’s a couple to keep in mind.

  1. The maximum amount allowable to donate this way is $100,000 per year.
  2. The charity must be a legitimate 501(c)(3) organization – not supporting your cousin’s garage band (as cool as that would be).
How do QCDs Affect RMD?

QCDs can be a game-changer for your Required Minimum Distributions (RMDs). QCDs count towards your RMD requirement for the year. So, you can use them to help satisfy your RMD and save on tax hits!

Any Pro Tips?

Keep good records! You’ll want to make sure the charity sends you a proper acknowledgment of your QCD, just like they would for any other donation. You will need these for tax time.

If you’re looking to make a meaningful impact while minimizing your distribution taxes QCDs could be your friend. Reach out to our team to see if QCDs fit into your financial plan!

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