Tax-smart Year-end Giving

Qualified Charitable Distributions and Required Minimum Distributions

What is a Qualified Charitable Distribution?

A qualified charitable distribution (QCD) is a direct tax-free transfer from your IRA custodian to a qualified charity (an IRS-approved organization). Only certain types of IRAs are eligible for QCDs, and there are conditions that must be followed.

Here are basic guidelines to know:

1. Traditional, inherited and rollover plans, as well as inactive (no longer receiving contributions) SEP (Simplified Employee Pension) and SIMPLE (Savings Incentive Match Plan for Employees) IRAs are eligible 
2. You must be age 70 ½ or older
3. Your distribution cannot pass through you—it must be administered directly from your IRA
4. You may transfer up to $100,000 per year to one or more qualifying charities
5. You may transfer a one-time $50,000 QCD to a charitable remainder trust or charitable gift annuity as part of the recent SECURE Act 2.0 legislation

What is a Required Minimum Distribution?

A required minimum distribution (RMD) is the minimum amount an individual is required to annually withdraw from their retirement account. At the beginning of 2023, the IRS increased the RMD age from 72 to 73. If you have questions about what this change means for you, we recommend you speak with a financial planner.

How do RMDs and QCDs interact?

QCDs count toward satisfying your RMD. Because QCDs go directly to charity (versus passing through you), you don’t have to report the distribution as taxable income or pay taxes on the donation. This can significantly lower your taxable income, satisfy your RMD requirement and fulfill your philanthropic goals—a win, win, win for year-end giving!

Start Planning Today

If you’d like to plan a 2023 gift from your IRA or learn about other legacy giving opportunities, please contact us! We welcome the chance to sit down with you and learn more about your values and goals.