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.
What is a Qualified Charitable distribution?
Qualified Charitable Distributions (QCDs) are funds from your Individual Retirement Account (IRA) that can be donated to a qualified nonprofit organization without first recognizing it as income.
Who is eligible?
If you are above the age of 70½ and have a Traditional IRA, you are eligible to make a QCD.
What are the benefits?
QCDs reduce your taxable income
Normally, funds that are withdrawn from a Traditional IRA count toward your annual income, which will increase your overall tax burden.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an exception to this rule—funds go directly from your IRA to your chosen charitable organization without needing to be withdrawn, thereby helping you avoid higher income taxes.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 that 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 full amount of the transfer tax-free.
It’s a win-win situation that both supports you and the causes you care about…namely VINES!
Call your financial advisor or IRA custodian for more information. Forms can be found on the websites of most major financial institutions.
**information from freewill.com