What is the Qualified Charitable Distribution?
- For individuals who have turned age 70 ½ and are subject to a Required Minimum Distribution (RMD) there is an exciting opportunity to take advantage of the Qualified Charitable Distribution (QCD) to remove the amount of your IRA distributions subject to an RMD by the amount given to charity. This may help you give to charity and get a tax benefit! Why this is important is under the new tax law (The tax Cuts and Jobs Act of 2017) fewer people are estimated to be able to itemize deductions because of the substantial increase in the standard deduction and therefore could lose the tax benefit of their charitable inclination.
- So what are the rules? First, you have to be subject to an RMD. The money must go directly out of the IRA to the charity and nothing can be received in return for the donation. A tax deduction for the contribution cannot be taken, but the amount transferred from the IRA is excluded from income and it counts towards the RMD. There is a $100,000 per year limit per person. A potential additional benefit is that you are reducing your provisional income and this may reduce the amount of your Social Security benefit that is subject to taxation. It is very important that you coordinate this decision with your tax advisor so it is done properly.