Are you at least 70.5 years old? Do you need to make a required minimum distribution (RMD) from your IRA? Another option is to make a qualified charitable distribution (QCD) to a 501(c)(3) charity, like PLEI! Many people miss out on this valuable tax break – but you don’t have to!
QCD’s bypass standard-deduction limits, for those who cannot itemize their charitable gifts. A QCD allows donations you make from your IRA to charity to be excluded from your income, lowering your adjusted gross income (AGI). QCD’s are a legitimate means of redirecting up to $100,000 per year from RMDs to a charity. If you are married, your spouse can exclude up to $100,000/year as well.
A QCD must be done as a direct transfer from the IRA to the charity. You cannot receive anything in return for your donation. A tax deduction for the charitable contribution cannot also be taken. QCDs are not available from any employer plans.
QCD’s reduce one’s adjusted gross income (AGI) and can reduce Social Security taxes and Medicare premiums. The amount transferred from your IRA to charity as a QCD counts toward your annual required minimum distribution (RMD). QCDs apply only to to taxable amounts in your IRA or, rarely, a RIRA.
Alert your tax preparer that you are doing a QCD, as form 1099-R may not indicate that a QCD has been made. With the recent higher threshold to itemize deductions, QCDs have advantages for charitable giving.
As always, seek professional tax advice for your specific situation. The IRS Q&A page is here, if you would like to read a bit more on charitable distributions.
And thank you for remembering PLEI in your giving considerations!