Can I do a Qualified Charitable Distribution from my IRA?

A QCD is a direct transfer of funds from an IRA to a qualified charity, which can count towards the IRA owner's required minimum distribution (RMD) for the year, up to $100,000 annually. This strategy is available to IRA owners who are age 70.5 or older and can provide several benefits, including reducing taxable income and potentially lowering Medicare premiums.

To determine whether a client can make a QCD, the following factors should be considered:

Age requirement: The IRA owner must be at least 70.5 years old at the time the QCD is made.

Distribution limits: The QCD can only be made up to a maximum of $100,000 per year.

Qualified charitable beneficiaries: The QCD must be made to a qualified charity, which includes public charities, private operating foundations, and certain private foundations.

The effect of account contributions: If the IRA owner has made contributions to their IRA for the year in which the QCD is made, the QCD cannot exceed the RMD for the year.

Step-by-step reporting process: The QCD must be reported on the IRA owner's tax return and certain requirements must be met to ensure the QCD is properly reported and not subject to tax.

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Robert J. Pyle, CFP®, CFA, AEP® founded Diversified Asset Management, Inc., in 1996 to provide personalized, comprehensive wealth management services to successful individuals, families, single women, and business owners. His specialty is addressing the complex financial needs of self-employed professionals, corporate executives, and small-business owners. Our disclosure can be found here. The views, opinion, information, and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting, or tax advice.