Do you want to benefit one or more charities during your lifetime and are age 70.5 or older?
If so, you can transfer up to $100,000 of IRA withdrawals each year directly to a qualified charity
without recognizing these withdrawals as income.

This type of IRA withdrawal is known as a “Qualified Charitable Distribution (QCD)” and it
will count toward satisfying the required minimum distribution (RMD) you must take from your
traditional IRA(s) each year after reaching age 70.5.

For example, if your RMD is $140,000 this year, you can transfer $100,000 directly to a qualified
charity tax free and take the remaining $40,000 as a taxable RMD. But you are not limited to taking
the amount of your RMD as a QCD if your RMD is under $100,000. For example, if your RMD is $60,000,
you can transfer $60,000 directly to a qualified charity to fulfill your RMD, or transfer a full $100,000 and
not include the $100,000 in income.

You may be wondering how a QCD is different from taking your IRA distribution personally
(for example, a check payable to you), and then making a charitable donation from your
personal funds.

There are a number of scenarios where a QCD may be more tax efficient.

• Standard deduction: If you don’t itemize your deductions on your tax return
(which due to the Tax Cuts and Jobs Act of 2017* will be more common for many
people starting with the 2018 tax year), you might save on taxes by doing a QCD.

• Medicare tax: A QCD may keep your income below the Medicare high-income
surcharge threshold of $250,000 per couple, saving your 3.8% additional tax
on net investment income

• Social Security: Since Social Security is taxable when income exceeds certain
thresholds (e.g. $44K for married couples), by taking a QCD, you have less of
your Social Security income taxed.

Full deduction of charitable contributions: Since you can only deduct charitable
contributions of cash you make personally up to 60% of your Adjusted Gross Income (AGI)
(subject to a five-year carry forward for excess contributions), a QCD enables you to
get the full benefit of the contribution regardless of your AGI.


Donations that are not eligible for QCDs

• Donor-advised funds, private foundations and supporting organizations are not
qualified charities to receive QCDs.

• A charitable contribution that results in your receiving anything of value does
not qualify as a QCD.


Other QCD rules

• You must be a least 70.5 at the time you request a QCD.

• The IRA custodian must make the payment directly to the charity.

• While the maximum annual QCD is $100,000, if you’re married filing a joint return, your spouse can
also do a QCD up to $100,000.

• The QCD must generally come from a traditional IRA you own as the original owner or a beneficiary.
SEP IRAs and SIMPLE IRAs only quality if hey are inactive, i.e., the employer sponsoring the plan is
no longer funding it.

• The amount of the QCD is limited to the amount of the distribution that would otherwise have
been included in income (so, you could only use your Roth IRA to make a QCD if your Roth IRA
distribution is not a qualified distribution and is therefore taxable).

• If you ever made nondeductible contributions to any of your traditional IRAs, generally
each requested distribution is treated as partially taxable and partially nontaxable.
However, a special rule applies to QCDs—the distribution is first considered to be paid from
otherwise taxable funds. This has the potential to reduce the tax liability on future
distributions you take personally.

• IRA custodians are required to report QCDs as normal distributions to you and the IRS
(or as a beneficiary distribution if from an inherited IRA). Make sure you inform your tax
advisor that you have taken a QCD so you as the taxpayer can properly indicate that
on your tax return


Talk to your Financial Advisor if you’d like to donate to a charity by taking a qualified
charitable distribution from your IRA.

*The provisions of the Tax Cuts and Jobs Act of 2017 affecting individuals are
scheduled to expire at the end of 2025.