Qualified Charitable Distributions (or Charitable IRA Rollover Gifts)
If you’re at least 59½ years old, you can take a distribution and then make a gift from your IRA without penalty. If you itemize your deductions, you can take a charitable deduction for the amount of your gift.
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.
Did you know the gift of a Qualified Charitable Distribution benefits donors age 70 1/2 and up?
The Qualified Charitable Distribution is an excellent way to show your support for Berkshire United Way and receive tax benefits in return. As you plan your required minimum distributions (RMD) for this year, consider using your IRA account to make the most of your charitable giving. You receive a tax benefit even if you take the standard deduction!
To start your Qualified Charitable Distribution, click here to complete the transaction in just a few steps.
It's important to consider your tax situation before deciding whether to make a charitable contribution from your IRA. Be sure to share this gift plan with your financial adviser.
- 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 Berkshire United Way.
- Gifts must be outright, meaning they go directly to Berkshire United Way. 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 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.
FREQUENTLY ASKED QUESTIONS
The QCD allows individuals 70½ and older to make direct distributions up to $100,000 per year to 501(c)(3) charities without having to count the distributions as income for federal income tax purposes. No charitable deduction may be taken, but distributions will qualify for all or part of the IRA owner’s required minimum distributions.
Individuals 70½ or older at the time of the contribution (you have to wait until 6 months after your 70th birthday to make the transfer).
$100,000 per year. The distribution must be outright to charity.
Distributions must come from your IRAs directly to Berkshire United Way. If you wish to help us with a gift from another retirement asset such as a 401k, 403b, etc., you must first roll those funds into an IRA. Then you can direct the IRA administrator to distribute the funds from the IRA directly to Berkshire United Way.
No. You cannot use the QCD to fund life-income gifts (charitable gift annuities, charitable remainder trusts or pooled income funds), donor advised funds or supporting organizations.
We will give you full credit for the entire gift amount. You will also receive a letter, which states that the gift qualifies as a QCD to use for tax reporting purposes.
Federal
You do not recognize the distribution to Berkshire United Way as income, provided it goes directly from the IRA administrator to us. Therefore, you are not entitled to an income tax charitable deduction for your gift.
State
Each state has different laws, so you will need to consult with your own advisers. Some states have a state income tax and will include this distribution as income. Within those states, some will allow for a state income tax charitable deduction and others will not. Other states base their income tax on the federal income or federal tax paid. Some states have no income tax at all.
Yes. Once you reach 70½, you are required to take required minimum distributions from your retirement plans each year according to a federal formula. QCDs count toward your minimum required distribution for the year in which you make the gift.
Yes, every individual who is the owner of a traditional IRA can use the Qualified Charitable Distribution for up to $100,000 each year.
Share this information with your financial advisor. Our office can provide additional information and examples of this gift plan. Call us. We would be delighted to help.
Contact your plan administrator or click here for detailed procedures for most administrators. Please let your plan administrator know this gift must be sent prior to December 31 to qualify as a charitable distribution for the tax year. Make sure you contact us when you direct the distribution so we can look for the check from your IRA administrator.