Qualified Charitable Distributions (QCDs)

Did you know the gift of a Qualified Charitable Distribution benefits donors age 70 1/2 and up?

 

If you’re a retiree over age 70½, you have a workaround that preserves the tax benefits of giving, even if you don’t itemize. Once you reach this age, you must start taking required minimum distributions (RMDs) from your individual retirement account every year. In what’s called a qualified charitable distribution (QCD), you can donate all or a portion of your RMDs, up to $100,000 a year, directly to charity.

While you don’t get a write-off for your gift, you also don’t owe taxes on that retirement-account distribution. For a taxpayer in the 22 percent bracket, funneling a $5,000 RMD to charity saves $1,100 in federal income taxes, the same as if you’d been able to deduct it.

When you give to United Way of Coastal and Western Connecticut, you can designate how your gift will be used to create a lasting, meaningful impact.

For more information, please contact Jennifer Smith at 203-297-6305.

  • You must be 70½ or older at the time of gift.
  • Distributions must be made directly from a traditional IRA account by your IRA administrator to United Way of Coastal and Western Connecticut.
  • Gifts must be outright, meaning they go directly to United Way of Coastal and Western Connecticut. Distributions to donor-advised funds or life-income arrangements such as charitable remainder trusts and charitable gift annuities do not qualify.
  • Gifts from 401k, 403b, SEP and other plans do not qualify. Ask your financial adviser if it would make sense for you to create a traditional IRA account so you can benefit from an IRA Qualified Charitable Distribution.
  • IRA Qualified Charitable Distributions are excluded as gross income for federal income tax purposes on your IRS Form 1040.
  • The gift counts toward your required minimum distribution for the year in which you made the gift.
  • You could avoid a higher tax bracket that might otherwise result from adding an RMD to your income.

If your administrator provides you with an IRA checkbook, please note that the date of your QCD is NOT the date you send the distribution check, but the date that your IRA administrator transfers the funds to the charity.

If you want your distribution check to be credited toward the current tax year, it is critical that you mail your check several weeks before the end of the year to ensure there is time for the check to be received by common reporting standards (CRS) and to clear your account. This is especially true if you are relying on those gifts to fulfill your required minimum distribution.

Be sure to check with your financial advisor to determine whether this gift plan is right for you. This information is not meant as tax or legal advice.