Qualified Charitable Distribution (QCD)
A qualified charitable distribution (QCD) is a distribution from an IRA (individual retirement account) made directly to an eligible charity, bypassing the owner of the account. Owners of IRAs who are at least age 70 1/2 can contribute some or all of their IRAs to charity.
Why is this a tax advantage strategy?
When you reach the age of 70 ½ you have to begin taking your RMD(required minimum distribution) from your IRA accounts. These RMDs are included in your gross income & your taxable income. If you don’t want or need the money and you are already giving to charity, why not do a qualified charitable distribution instead? QCDs allows certain IRA holders the opportunity to withdraw up to $100,000 annually from their traditional IRA and deliver the funds directly to the qualifying charitable organization, resulting in a tax-free distribution that may satisfy the client’s RMD. QCDs count toward your RMD for the year, but you avoid any tax on these distributions because they are not included in your adjusted gross income or your taxable income.
If you would like more information on this tax savings strategy or have other questions, please do not hesitate to contact us.