Qualified Charitable Distributions. Right Choice For You?
Hi, and thanks for stopping by. My name is Tina Anders, and I am the Fee Only certified financial planner for my firm located here in Petaluma, California – Anders Wealth Management. And today I’m going to talk to you about Qualified Charitable Distributions, also known as QCD’s.
First of all, I’m just going to preface this by saying, if you’re thinking of doing a QCD from your IRA to a charity, talk to your tax professional before you do so because you want to make sure it’s in line with your tax goals.
A Qualified Charitable Distribution is a great way to transfer money directly from your individual retirement account to a qualified charity. It’s nondeductible because you’re not taking the income and then moving it over. And it goes directly to the charity. It achieves some positive tax consequences potentially and also achieves some philanthropic ideals. So, it’s a great way to do both of those.
Required minimum distributions, which are oftentimes the vehicle from which you would contribute from an IRA to a qualified charity. They are taxable or withdrawals from an IRA for instance mostly are taxable. So, it could push you, a distribution from your IRA, could push you into a higher tax bracket, thereby increasing your tax liability. It could also reduce your ability to get certain tax credits or deductions.
You can put up to $100,000 per year to a qualified charity from your IRA. And for married couples, you can each do it. So, you can each do a $100,000 as long as it’s from your own IRA. You can make the contribution to several charities as long as it doesn’t exceed $100,000. You can do it at the age of 70 and a half. If you did it prior to the age of 70 and a half, it’s going to count as taxable income so be careful about that.
You must take the funds from the IRA to the charity by the RMD deadline, which is generally December 31st of every year. As I mentioned at least a couple of times now, funds must come directly from the IRA and go straight into a qualified charity. The check needs to be made out to the charity. If the checks made out to you, the donation will be counted as taxable income to you. You don’t want that!
Eligible IRAs for QCD’s… traditional IRAs, inherited IRAs, SEP and simple IRAs, which as long as they’re inactive plans. And I’ll tell you what’s not a qualifying charity would be a donor advised fund, which we can talk about another time. Private foundations and supporting organizations, those are not eligible for qualified charitable distributions.
OK, so that’s just a brief note on QCD’s, Qualified Charitable Distributions. I want to say thanks again for stopping by. If you’d like to comment, question, point out something that you would like me to discuss in a video. Please send an e-mail to [email protected] or go to my website anderswealth.com. Go to the contact page and on the contact page, fill out as little or as much as you want. But at the bottom there’s a text box you can put in whatever information you want. I will be sure to see that I will respond to you as well as if you’d like me to talk on a video about a certain topic. I would be glad to do that as well if I can fit it in. Thanks again for stopping by. I am in your corner.