What is a Qualified Charitable Distribution (QCD)?
- The “IRA charitable rollover” provides an annual exclusion from gross income up to $100,000 for Qualified Charitable Distributions (QCDs) from an IRA.
- Donors age 70-1/2 and older can transfer up to $100,000 from their IRA to qualifying charities each year.
- The amount transferred may be used to meet the donor's required minimum distribution.
- Donors may establish a non-advised designated fund (non-advised fund) and select charities in advance that will receive annual grants from the fund, either for a term-of-years or in perpetuity. In order to qualify for the QCD, donors may not maintain any advisory capacity over the fund once it’s established (i.e. They may not add or remove selected charities, or change the distribution plan).
- QCDs may be directed to the non-advised fund, or can be used to pay premiums on gifts of life insurance with proceeds directed to the fund upon the donors death.
How to Establish a Charitable Fund at InFaith with QCDs
- Create a Fund online at InFaith Community Foundation, or return the Fund Workbook and send it to InFaith.
- InFaith drafts a Fund Agreement based on charitable requests made by the donor, and sends it to the donor for signing. Their financial professional also receives a copy.
- The signed Fund Agreement is returned to InFaith. We countersign and send a copy.
Note: Donors can also make a gift of QCDs to one of InFaith's Collaborative Funds, or create/contribute to an endowment fund for their church or other faith-based public charity.
What are the tax advantages?
- The amount directed to charity is not included in the donor's adjusted gross income (AGI).
- Giving these assets to charity, versus taking required minimum distributions (RMDs) into income, may enable donors to avoid certain disadvantages that can come with a higher AGI, such as higher Medicare premiums, self-employment or Social Security taxes, etc.
- There is no income tax to the donor on the IRA distributions to the charity, and charities pay no income tax on the distributions they receive.
- As QCDs are not subject to percentage limitations on charitable deductions, this an ideal strategy for donors who have maxed out charitable deductions or do not itemize deductions.
More on Qualified Charitable Distributions
- Only IRA distributions qualify - no SEPs, SIMPLE plans, 403(b), 401(k), profit-sharing plans or pension plans.
- Distributions must be made directly to charity from the plan administrator.
- The IRA owner must be at least 70-1/2 on date of distribution.
- There's a limit of $100,000 per individual per year.
- Because the distribution is not counted in the donor’s AGI, there is no charitable deduction on federal income tax returns.
- State income tax treatment may vary from federal law.
What if the donor has already taken RMDs for the year?
What charities can benefit?
Resources to Support Your Work
- Your Values Your Giving brochure
- Giving Options & Benefits
- Give Now, Give Later, Give & Receive brochure
- Create a Fund at InFaith online, or download Fund Workbook
- Your Plan for Giving Information Sheet
- Request Materials from InFaith Community Foundation