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IRA RMD QCD—Alphabet Soup or Smart Giving Option? (Guest post)

By Jody Dilday

This post is being reprinted with permission from the Arkansas Community Foundation.

A Qualified Charitable Distribution (QCD) is a direct transfer of funds from a traditional IRA (Individual Retirement Account) to a public 501c3 nonprofit. A QCD can count as all or some of the IRA owner’s required minimum distribution (RMD), and the QCD amount is not added to taxable income as an RMD normally would be. 

The QCD is an effective smart giving option, particularly for those who take the standard deduction and would miss out on writing off charitable contributions. But even those who itemize can benefit from using a QCD because keeping taxable income lower may reduce the impact of other tax credits and deductions, including Social Security and Medicare.

Here are some things to remember about IRA qualified charitable distributions:  

  • A donor must be 70½ or older to be eligible to make a QCD.
  • The amount gifted to charity is not counted toward the donor’s ordinary income.
  • Donors can request multiple direct transfers from their IRA to qualified charities in a year, but only up to $100,000 can be excluded from income as an IRA QCD 
  • If a client is married, their spouse is also eligible to contribute up to $100,000 from their IRA
  • The QCD must come directly from the institution holding the IRA account (IRA checkbooks are ok). Funds distributed directly to IRA owners first, which they in turn give to charity, do not qualify as QCDs.
  • Because the IRS counts the first distribution from an IRA each year towards satisfying the RMD requirement, a QCD should be directed first, before taking the RMD, to ensure that the QCD satisfies that obligation. 

One important caveat: qualified charitable contributions from an IRA cannot be gifted to donor-advised funds, supporting organizations, private non-operating foundations, charitable gift annuities or charitable remainder trusts.

For more informataion, contact Jody Dilday in the NWA office of Arkansas Community Foundation. She can be reached at 501-492-3577 or jdilday@arcf.org.