Are you 70 1/2 or older
Have an IRA
Would like to gift to a qualified charity, tax-free
If you make donations and are subject to required minimum distribution (RMD) rules for your IRA, gifting some of your RMD income using the qualified charitable distribution strategy may be a great way to both benefit the charity and reduce taxes you pay. A qualified charitable distribution will count toward satisfying your RMD, and neither you nor the charity will have to pay income taxes.
The key benefit of a qualified charitable distribution (QCD) is that the distribution amount is not included on your Form 1040 as income. That’s a good thing, but there’s a bit of a downside, too. The QCD cannot be used as a deductible charitable contribution if you itemize your deductions. That would be something of a double tax break for the same transaction. Given the changes in the tax code for 2018-2025, resulting from the Tax Jobs and Cuts Act of 2017, more people will be using the standard deduction, so using QCD will make good financial sense.
Yes. In December 2015, former President Obama signed the PATH Act, which made qualified charitable distributions permanent. Prior to this, the provision had to be extended each year by an act of Congress.
Use this checklist to learn more about the tax rules around qualified charitable distributions.
Only IRAs are eligible for qualified charitable distributions. If you have money in a 401(k) or other non-IRA plans, the assets must first be rolled to an IRA to be eligible for a qualified charitable distribution. Ongoing SEP or SIMPLE IRAs are not eligible for qualified charitable distributions. A plan is ongoing if a contribution is made to it for the taxable year of the qualified charitable distribution.
You cannot take a qualified charitable distribution until you turn 70 1/2.
You cannot take active receipt of the money. If you want to personally mail the check to the charity, request the payee of the check to be the charity, but have the check mailed to your home or office so you can present it to the charity personally.
Only distributions made to a qualified 501(c)(3) organization, like Haven Community Church, can qualify as a qualified charitable distribution. Distributions to a donor-advised fund, supporting organization, private foundation, charitable remainder trust, charitable gift annuity, and pooled income funds do not qualify.
Because there is no special process or reporting of a qualified charitable distribution on IRS Form 1099R, it is important that your tax advisor is made aware that the distribution is a qualified charitable distribution so it is properly reported on your tax return. The instructions for IRS Form 1040 include information on reporting qualified charitable distributions.
We recommend you meet with your tax advisor as well as your financial advisor to learn more about qualified charitable distributions.