Making Qualified Charitable Distributions from Your IRA
As the end of the year quickly approaches, and if you are age 70 ½ or older, you may be thinking about your Required Minimum Distribution (RMD). RMDs are mandatory distributions from your Traditional IRA that increase your total taxable income. If you don’t need the income, you might consider directing your IRA distribution to a charitable organization, minimizing your taxable income.
“Qualified Charitable Distribution” (QCD) is the IRS description of this strategy. A QCD can be made in lieu of an RMD from a Traditional IRA to eligible charitable organizations.
Here are the eligibility requirements:
- Donors must be age 70 ½ or older
- Distributions up to $100,000 can be made by an individual or $200,000 for a married couple
- Distributions must be made to qualified 501(c)3 public charities
- Distributions must be paid directly to the organization from the IRA custodian
- Distributions cannot be directed to a Donor Advised Fund
- No goods or services can be received in exchange for the distribution
- Distributions will be reported to the IRS on Form 1099-R. The individual will report the QCD on IRS Form 8606 excluding the amount from their taxable income
Although Donor Advised Funds are not eligible to receive QCDs per the IRS, the St. Louis Community Foundation has several alternatives that donors can consider.
The following types of funds are eligible to receive QCDs from IRAs:
- Designated Funds support the good work of specific nonprofit organizations
- Field of Interest Funds support broad areas of need and award grants to the community organizations and programs addressing them.
- Arts and Culture
- Community Development
- Health and Human Services
- Animal Welfare
- Scholarship Funds help students of all ages receive a quality education. Donors set the award criteria and the St. Louis Community Foundation promotes the scholarship opportunity, accepts applications, verifies students’ eligibility and processes scholarship payments.
- Unrestricted Funds meet the changing needs of the community. The St. Louis Community Foundation’s professionals evaluate all aspects of community well-being and award strategic grants to select projects and programs in the St. Louis region.
Donor advised funds are not eligible for QCDs, but donations to donor advised funds are tax deductible, so we suggest working with your financial advisor or tax consultant to determine the best giving option.
For more information about QCD alternatives, contact Christine Burghoff, Director of Giving Strategies, 314-880-4967 or Donna Frederick, Giving Strategist, 314-880-4958.
Interested in other funds available at the St. Louis Community Foundation, click here to learn more.