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Plans to Donate IRA Distributions to Charity

A Qualified Charitable Distribution (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 (RMD) 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.

QCDs don't require that you itemize. With recent tax law changes, this means you can take advantage of the higher standard deduction, while still using a QCD for charitable giving and lowering your taxable income.

Can I make a QCD?

In order to make a QCD, you must me the following requirements:

  • You must be 70½ or older to be eligible to make a QCD.
  • QCDs are applicable only for traditional and Roth IRA distributions (excludes SEP and Simple IRAs)
  • QCDs are limited to the amount that would otherwise be taxed as ordinary income. This excludes non-deductible contributions (non-deductible IRA and ROTH).
  • 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.

Does the GSW Foundation Qualify for a QCD?

As a fully independent 501(c)(3) organization, the GSW Foundation is a qualifying organization. Some charities do not qualify for QCDs:

  • Private foundations
  • Supporting organizations: i.e., charities carrying out exempt purposes by supporting other exempt organizations, usually other public charities
  • Donor-advised funds, which public charities manage on behalf of organizations, families, or individuals

Tax Reporting

A Qualified Charitable Donation is reported as a normal distribution on IRS Form 1099-R for any non-Inherited IRAs. For Inherited IRAs or Inherited Roth IRAs, the QCD will be reported as a death distribution on form 1099-R. Since the QCD is not reported as income to you, you should not report the QCD amount as a tax-deduction on Schedule A.

A QCD is not subject to withholding. State tax rules may vary, so for guidance, consult a tax advisor. When making a QCD, you must receive the same type of acknowledgement of the donation that you would need to claim a deduction for a charitable contribution.

Please consult a tax advisor and your plan custodian for help determining if your retirement plan qualifies for QCDs.

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