Qualifed Charitable Distributions and Other IRA-Based Gifts

Right here in our community, Cape Fear Literacy Council addresses the critical need of empowering adults through education.  When planning your IRA withdrawal strategy, you may want to consider making charitable donations through a Qualified Charitable Distribution (QCD.)

A QCD is a direct transfer of funds from your IRA custodian, payable to a qualified charity. QCDs can be counted toward satisfying your required minimum distributions (RMDs) for the year, as long as certain rules are met.In addition to the benefits of giving to charity, a QCD excludes the amount donated 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.

Can I make a QCD?

While many IRAs are eligible for QCDs—Traditional, Rollover, Inherited, SEP (inactive plans only), and SIMPLE (inactive plans only) —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. This excludes non-deductible contributions.
  • The maximum annual amount that can qualify for a QCD is $100,000. 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 $100,000.)
  • For a QCD to count towards your current year’s RMD, the funds must come out of your IRA by your RMD deadline, generally December 31.

Any amount donated above your RMD does not count toward satisfying a future year’s RMD. Funds distributed directly to you, the IRA owner, and which you then give to charity do not qualify as a QCD.

Under certain circumstances, a QCD may be made from a Roth IRA. Roth IRAs are not subject to RMDs during your lifetime, and distributions are generally tax-free. Consult a tax advisor to determine if making a QCD from a Roth is appropriate for your situation.

What If I’m Not Yet 70½?

People of any age can name Cape Fear Literacy Council as partial or 100% death beneficiary of an IRA, 401(k), 403(b) plan or other retirement account. Any amount donated avoids the income tax –and possibly estate tax –that family members would owe on distributions from retirement accounts.

It’s also possible to reserve payments for life for family members, with IRA assets passing to Cape Fear Literacy Council at a later date. Income tax on the IRA is spread out over the family members’ lifetimes.

What are My Other Legacy Gift Options?

More information about Cape Fear Literacy Council’s Planned Giving options can be found in our  CFLC’s Individual Giving Program Packet.

Please Remember

Remember to consult with your tax planner or financial advisor before making any decisions regarding your IRA Account or Planned Giving.