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Qualified Charitable Distribution


If you have a balance in an employer retirement account or in a traditional IRA, you’re required to withdraw a certain amount annually once you pass age 70 ½.  This rule is mainly in place so that the IRS has a chance to tax dollars previously excluded from your taxable income before you pass away and someone else inherits the account.

There are ways to efficiently manage your tax bill, however, once these required minimum distributions (RMDs) start.  One of which is a Qualified Charitable Distribution (QCD).

A QCD allows Individual Retirement Account (IRA) owners who are at least 70 ½ to donate to a church or charity directly from their IRA.

Making a QCD, as opposed to a normal charitable gift, has two main advantages:

  1. The QCD counts toward satisfying your required minimum distribution (RMD).
  2. The QCD is excluded from your income.

This second benefit really stands out under the new tax law. With fewer taxpayers itemizing deductions under the new law, the tax deduction for contributions to charities will be lost for many people. However, if you make a QCD, that amount is completely excluded from your income for tax purposes.

So, for any retiree that is 70 ½ or older, owns an IRA subject to RMDs and is charitably inclined, a QCD becomes a way to preserve an income-tax-reducing charitable deduction under the new tax law.

Remember, when making a QCD, you must receive the same type of acknowledgement of the donation that you would need to claim a tax deduction for the charitable contribution. This is easily satisfied, as you will likely need to complete a specific form, provided by the company that holds your retirement account, to complete a QCD.

Please contact us if you have any questions about making a QCD.