What are the benefits of an IRA Qualified Charitable Distribution (QCD)?
- Lower your taxable income by fulfilling all of part of your Required Minimum Distribution (RMD)
- Lower the burden of estate tax on heirs
- You can give up to $100,000 each year in QCDs, potentially reducing your future RMDs
- You transform tax dollars into ministry action to help even MORE families experience more life, love and freedom in Christ!
What is the difference between a Required Minimum Distribution (RMD) and Qualified Charitable Distribution (QCD)?
A Required Minimum Distribution (RMD) is the portion of your IRA, SEP IRA, or SIMPLE IRA that you are legally required to withdraw yearly after you reach age 73, even if you don’t need or want the funds. These distributions become taxable income, increasing your annual gross income (AGI) and could potentially put you in a higher tax bracket, affect Medicare eligibility, or increase your Social Security income tax rate. You can withdraw more than the minimum requirement, but all funds distributed are included in your taxable income.
A Qualified Charitable Distribution (QCD), previously called the IRA Rollover, is a giving tool that allows you to send funds directly from your IRA to a qualified charity, like Zoweh, beginning at age 70 1/2. This distribution can fulfill all or part of your RMD in the tax year it is given and allows the withdrawal to be excluded from your taxable income. QCDs can be made to multiple charities in the same year, allowing you to leverage your IRA to fulfill all of your charitable goals. Additionally, you can send up to $100,000 in QCDs annually, and giving QCDs above your RMD can help you draw down the balance of your IRA and reduce the amount of future RMDs as well as your taxable estate. Beginning in 2024, the QCD limit of $100,000 will be adjusted for inflation, amplifying the benefits of this smart way to give. State tax on QCDs vary so if you are considering this type of gift, you should consult your tax advisor to see if this strategy is a good fit for you.
Required Minimum Distribution RMD
- An RMD is the legally required amount to be withdrawn from your IRA annually, beginning at age 73.
- RMDs are based on IRA balance and an IRS life expectancy table.
- RMDs are included in your taxable income and increase your annual gross income (AGI).
Qualified Charitable Distribution QCD
- A QCD allows you to send funds directly from your IRA to a qualified charity
- QCDs can fulfill all or part of your RMD, eliminating the increase to your taxable income.
- Can give up to $100k per year in QCDs.
How Do I Give from My IRA?
If you are like many friends of Zoweh, and realize that giving from your IRA is a smart tax-saving way to steward your funds, making a QCD is easy! Just contact your IRA financial institution and request a Qualified Charitable Distribution providing them with the name and address of the charitable organization you wish to support. They will make make a check out to the organization and mail it directly to them. Here is a quick checklist for you:
- Contact your IRA administrator.
- Provide the custodian with Zoweh's name, mailing address and the amount you wish to distribute.
- Request that your name be included on the memo line or stub of the check.
- Have your IRA custodian mail the check directly to Zoweh Attn: Planning Giving.
- Let Zoweh know that you are giving from your IRA by emailing partners@zoweh.org
IRA Charitable Distribution FAQs
Q: What is an IRA Charitable Rollover Distribution?
A: An IRA Charitable Rollover Distribution is a tax-efficient way to donate money to a charitable organization directly from your Individual Retirement Account (IRA). This distribution can count towards your Required Minimum Distribution (RMD) and is not subject to income tax.
Q: Who is eligible to make an IRA Charitable Rollover Distribution?
A: Individuals who are at least 70½ years old and have an IRA are eligible to make an IRA Charitable Rollover Distribution.
Q: How much can I donate using a IRA Charitable Distribution method?
A: You can donate up to $100,000 per year, per plan owner. Thus, a married couple who both own IRAs could make a qualified charitable contribution of $200,000 in a single tax year.
Q: Can I make an IRA Charitable Rollover Distribution if I have a Roth IRA?
A: No, only traditional IRAs are eligible for an IRA Charitable Rollover Distribution.
Q: Is there a deadline to make a donation to avoid income taxes?
A: For a QCD to count for your required minimum annual IRA distribution it must be given by the same deadline as a normal distribution which is usually December 31 of the tax year.
Q: What types of charitable organizations are eligible to receive an IRA Charitable Rollover Distribution?
A: 501(c)(3) organizations, such as churches, schools, and charitable organizations like Zoweh are eligible to receive an IRA Charitable Rollover Distribution. Donor advised funds and private foundations are not eligible.
Q: Can a donor fund a charitable gift annuity with an IRA?
A: Yes, it is possible under the new Secure Act 2.0 in passed in 2022. There are specific qualifications such as being 70 ½ or older and a maximum dollar amount.
Q: Do I need to report an IRA Charitable Rollover Distribution on my tax return?
A: Yes, you must report the distribution on your tax return, but it will not be taxed as income.
Q: How is the distribution made so the donor will avoid a tax penalty?
A: The best way is for a donor to authorize his or her IRA plan and the administrator to make the distribution payable directly to the charity. Accordingly, it’s important that the plan administrator provides the charity with information about both the donor and the charitable gift so that the charity can present the donor with a letter of acknowledgement. Without this documentation, the exclusion is not available.
