If you are age 70 ½ or older and have money in an IRA account, you must, as you may know, take a “required minimum distribution” or RMD from your account (excluding Roth IRAs). Not doing so can result in big trouble and penalties with the IRS. If you want to meet this requirement without increasing your taxable income — and support your favorite charity in the process, you might consider utilizing the Qualified Charitable Distribution (QCD) rule before the end of the calendar year.
wrapped up 100 dollar bills.
A QCD is an otherwise taxable distribution from a traditional IRA, owned by an individual who is age 70 ½ or older, that is paid directly from the IRA to a qualified charity. The maximum dollar amount of a QCD is limited to $100,000 per year, per taxpayer. A married couple, where both are subject to an RMD, may each contribute up to $100,000.
To complete a QCD from an IRA to a charity, you must:
- Be subject to a Requirement Minimum Distribution.
- Work with your IRA custodian and request a check made payable directly to the charity.
- Make certain the distribution does not have tax withholding.
While many custodians will mail the check directly to the charity, consider having the check made payable to the charity, then sent to you for forwarding to the charity. This allows you to keep a paper trail of the request and know the date of mailing.
Taking advantage of a Qualified Charitable Distribution takes a little extra coordination, but the benefit to your charity, and your taxes, make it worth the effort.