IRA, Qualified Charitable Distribution (QCD)
IRA, Qualified Charitable Distribution (QCD)
What are the Benefits of an IRA?
Benefits include:
- Avoiding taxes on transfers up to $100,000 from your IRA to The Foundation,
- satisfying your annual Required Minimum Distribution (RMD), and
- reducing your taxable income - even if you do not itemize deductions.
See below for more information regarding the SECURE ACT 2.0 implications.
What is a Qualified Charitable Distribution?
A Qualified Charitable Distribution (QCD) is a transfer or distribution from an IRA made directly to The Foundation, as an eligible charity, bypassing the owner of the account. These distributions can be made from a Traditional IRA or an Inherited IRA.
Owners of Individual Retirement Accounts who are at least age 70 1/2 can contribute some or all of their IRAs to charity up to $100,000. Beginning in 2024, this amount will now be adjusted for inflation.
Moreover, for those who are at least 73, QCDs count toward the IRA owner's required minimum distribution (RMD) for the year.
What does the Secure Act 2.0 mean for you?
As background, SECURE 2.0’s provisions build on the original SECURE Act of 2019 (“SECURE” stands for “Setting Every Community Up for Retirement Enhancement). SECURE 2.0 includes the Qualified Charitable Distribution (QCD) enhancements that have been in the works for many months.
Here are three key provisions affecting philanthropists in the new law:
-
Taxpayers may now make a
one-time $50,000 QCD transfer to a Charitable Remainder Trust
(CRT), or other split-interest
gift such as a Charitable Gift
Annuity (CGA). These are the “Legacy IRA” provisions.
- Note that the law effectively mandates that the CGA or CRT be created solely for the purpose of receiving a QCD because the new statute requires that the vehicle contain only IRA assets.
-
The Required Minimum
Distribution (RMD) age
(previously 72) increased to 73
on January 1, 2023. The age will
increase to 75 beginning on
January 1, 2033. While this
provision is not directly tied
to charitable giving, it will
nonetheless impact your overall
financial plans and potentially
affect the timing and strategy
of your philanthropy.
- As a reminder, “required minimum distribution” (RMD) refers to the mandated amount that a taxpayer must withdraw from qualified retirement plans, which include IRAs as well as 401(k)s and other tax-deferred retirement accounts.
- The annual per-taxpayer $100,000 QCD cap is now slated to be indexed for inflation, which will allow taxpayers to give even more from their IRAs directly to charity.
Source: Wealthmanagment.com
IRA Charitable Rollover to a Charitable Gift Annuity
This will allow you to receive lifetime payments to boost your retirement income or provide a lifetime payment for you or your spouse.
- Once-in-a lifetime tax-free distribution from your IRA for a Charitable Gift Annuity
- Maximum allowable distribution
- Lifetime income payments of 5% or greater
- Lowers taxable estate
Click here for more on Charitable Gift Annuities.
Source: Fidelity.com
For your Estate Planning purposes
Sample IRA Distribution Letter Instructions
First, contact your IRA administrator and see if they have a form that you can use to make an IRA direct charitable gift request. If that is not available, clicking on the button above will offer a sample letter that can be used to request a direct distribution from an IRA (Individual Retirement Account) to your church or favorite charity. (This sort of gift is only available to individuals who are over age 70 1⁄2.)
You may print the sample letter and simply fill in the applicable fields by hand or retyping.
Fill in the relevant fields as follows:
- Enter the name and address of your IRA custodian/administrator.
- Enter the date.
- Enter your IRA account number.
- Enter the amount you wish to transfer to charity.
- Enter the name and address of the church or charity. If you wish to benefit more than one charity, you will need to create a separate letter for each.
- Briefly name the purpose of the gift whether it is for general charitable use or for a specific program or activity.
- Include a phone number or email address where you can be contacted.
- Sign the letter, print your name as the Plan Owner, and include your return mailing address.
You should keep a copy of the letter for your records.
This sort of gift may be new to some churches and charities. To ensure that you are provided an appropriate gift receipt letter, The Foundation is happy to issue the Gift Acknowledgement letter to you for your tax records.
Please remember that this sort of gift is not income to you and, therefore, it is not tax deductible. The Charitable Distribution reduces your Adjusted Gross Income thus providing a tax benefit. The gift counts toward your Required Minimum Distribution (RMD) and is a great option for anyone who does not itemize charitable deductions and/or anyone who does not want to incur that additional RMD income.