QCD qualified charitable distributions

If you are over the age of 70 1/2 and have an IRA you may really like this. The short story – you can donate to charities from your IRA. There is of course many other details you need to know.

I have an opportunity for those who are fortunate to be over the age of 70 1/2.  The opportunity is to donate money to charity from an IRA.  This is a very late and not confirmed option.  We are await President Obama’s signature.

If you are interested in making donations to charity from your IRA – please call me ASAP so that we can sort out making this work for you.  My direct line is 408-874-6234.  Keep in mind this will take a little time and effort to accomplish.

QCD stands for Qualified Charitable Distribution.  Our government has made these available for a few years, however usually in some sort of fire drill like this.  Nonetheless, this is an opportunity for those who have charitable desires.
Many financial institutions have cut-off dates so YOU must act quickly. If YOU have already done direct transfers to charity in 2014, they are ok. You will be able to use the QCD treatment on your tax returns. If you have already taken your RMDs for the year you will NOT be able to use a QCD to offset your RMD but you can still do a QCD transaction up to $100,000.

If the President does not sign the bill into law, your will have treat all IRA distributions as taxable distributions and take a charitable deduction for amounts that were directly sent to charity.
A quick review of the general rules for QCDs follows

  • Only applies to IRA owners or beneficiaries age 70½ and over and is capped at $100,000 per person, per year
  • Only applies to direct transfers of IRA funds to charities and not gifts made to grant making foundations, donor advised funds or charitable gift annuities
  • No split interest gifts of any type will qualify
  • Applies to IRAs, Roth IRAs and INACTIVE SEP and SIMPLE IRAs. It does NOT apply to distributions from any employer plans
  • The charitable donation from an IRA will satisfy a required minimum distribution, but the IRA distribution is not includable in income
  • No tax deduction can be taken for the charitable contribution
  • For a married couple where each spouse has their own IRAs, each spouse can contribute up to $100,000 from their own IRAs.
  • If more than $100,000 is withdrawn from the IRA and contributed to a charity, there is no carryover to a future year. The excess is taxable income and a charitable deduction can be claimed if the taxpayer itemizes
  • The contribution to the charity would have had to be entirely tax deductible if it were not made from an IRA. There can be no benefit back to the taxpayer
  • The distribution from the IRA to a charity can satisfy an outstanding pledge to the charity without causing a prohibited transaction
  • The charitable substantiation requirements apply
  • QCDs apply only to taxable (pre-tax) amounts. This is an exception to the pro-rata rule.
I have complete information on QCDs in the Charity as a Beneficiary module.