What is a Qualified Charitable Distribution (QCD)?
When planning your giving, you may want to consider making a Qualified Charitable Distribution from your Individual Retirement Account.
A QCD is a direct transfer of funds from your IRA to a qualified charity like the Diocese of Arlington. QCDs can be counted toward satisfying your Required Minimum Distributions (RMDs) for the year, as long as certain rules are met.
A QCD excludes the amount distributed from taxable income, which is unlike regular withdrawals from an IRA. Keeping your taxable income lower may reduce the impact to certain tax credits and deductions, including Social Security and Medicare. Also, QCDs don’t require that you itemize, meaning you may decide to take advantage of the higher standard deduction, but still use a QCD for charitable giving
While many IRAs are eligible for QCDs there are requirements.
- You must be 70½ or older to be eligible to make a QCD.
- QCDs are limited to the amount that would otherwise be taxed as ordinary income.
- The maximum annual amount that can qualify for a QCD is $111,000. This applies to the sum of QCDs made to one or more charities in a calendar year. (If, however, you file taxes jointly, your spouse can also make a QCD from his or her own IRA within the same tax year for up to $111,000.)
- For a QCD to count towards your current year’s RMD, the funds must come out of your IRA by your RMD deadline, generally by December 31.
Any amount given above your RMD does not count toward satisfying a future year’s RMD. Funds distributed directly to you, the IRA owner, which you then give to charity, do not qualify as a QCD.
