The IRS annually reminds Individual Retirement Arrangement (IRA) owners age 70½ or over that they can transfer up to $100,000 to charity tax-free each year. Married couples, both with IRA’s and age 70½ or over, can exclude from gross income up to a total of $200,000 per year.
These transfers, known as qualified charitable distributions or QCDs, offer eligible older Americans a great way to easily give to charity before the end of the year. For those who are at least 73 years old, QCDs count toward the IRA owner’s required minimum distribution (RMD) for the year.
These transfers, known as qualified charitable distributions or QCDs, offer eligible older Americans a great way to easily give to charity before the end of the year. For those who are at least 73 years old, QCDs count toward the IRA owner’s required minimum distribution (RMD) for the year.
How to set up a QCD:
Any IRA owner who wishes to make a QCD should contact their IRA trustee in enough time to complete the transaction before the end of the year.
Normally, distributions from a traditional IRA are taxable when received. With a QCD, however, these distributions become tax-free as long as they’re paid directly from the IRA to an eligible charitable organization. QCDs must be made directly by the trustee of the IRA to the charity.
Report Correctly:
A QCD must be reported on your federal income tax return, normally filed during the tax filing season.
Early in the year, the IRA owner will receive Form 1099-R from their IRA trustee that shows any IRA distributions made during calendar year, including both regular distributions and QCDs.
Designate a Charity as a Beneficiary of IRA:
- Request a beneficiary designation form from your employer, plan administrator, bank, or financial services firm.
- Fill out the form.
- If your IRA is through a bank or financial services firm, they can provide you with suggested language for naming beneficiaries.