TAX-FREE DISTRIBUTIONS from IRA/QCD

If you have an IRA, then you probably know that beginning at the age of  72 ½, you must take your Required Minimum Distribution (RMD), of which you are taxed, every year even if you do not need or want the money. Before taking your RMD on your IRA, explore if a Qualified Charitable Distribution (QCD) is right for you.  A QCD allows you to make a charitable gift directly from your IRA, and the amount of the gift will not be included in your taxable RMD.

∼ If you are 72 or older, you can use your individual retirement account (IRA) to support children in need.
∼ Avoid taxes on transfers of up to $100,000 from your IRA to support Hibiscus Children’s Center.
∼ Satisfy some or all of your required minimum distribution for the year.
∼ Reduce your taxable income, even if you do not itemize deductions.
∼ Make a gift that is not subject to the deduction limits on charitable gifts.
∼ Use your rollover to make payments on an existing pledge to us.
∼ Donor may not receive any benefit for the gift, i.e. no event sponsorships, ticket purchases, etc. can qualify.

Benefits of a QCD

One of the largest benefits of a QCD is fulfilling all or part of your RMD while avoiding paying taxes on the gifted amount of the RMD. Due to the decreased balance of your IRA, it may minimize future required withdrawals. To avoid being taxed, the gift must be made directly from your IRA, and you may donate up to $100,000 to a charity.

If you are taking distributions on your IRA that you don’t need or want, consider making a charitable gift through a QCD.  Here is a sample letter you can adjust for your administrator.  Sample Letter to IRA Administrator

Update:  On December 20, 2019, President Trump signed the Setting Every Community Up for Retirement Enhancement Act (SECURE Act). The SECURE Act, which is effective January 1, 2020. The Act is the most impactful legislation affecting retirement accounts in decades. The SECURE Act has several positive changes: It increases the required beginning date (RBD) for required minimum distributions (RMDs) from your individual retirement accounts from 70 ½ to 72 years of age, and it eliminates the age restriction for contributions to qualified retirement accounts. However, perhaps the most significant change will affect the beneficiaries of your retirement accounts: The SECURE Act requires most designated beneficiaries to withdraw the entire balance of an inherited retirement account within ten years of the account owner’s death.