How An IRA Strategy Helps Some Be More Generous On Giving Tuesday
There’s a bonus for taxpayers ages 72 and older who are taking required minimum distributions . For them, the QCD counts toward the year’s RMD. By making a QCD, you can take all or part of the RMD tax-free.
To qualify as a QCD, a charitable contribution must be made directly from the traditional IRA to a charity. The IRA owner can direct the IRA custodian to make distribution directly to a charity or charities. Or the custodian can give the owner a check made out to the charity, which the owner delivers. Some custodians give IRA owners checkbooks. When a check is made payable to a charity, that also qualifies as a QCD.
The traditional IRA owner must be at least age 70½ on the date of the transfer from the IRA to the charity. Suppose you turn 70½ in September and had money transferred from the traditional IRA to a charity in March. That’s not a QCD; it will be treated as an ordinary distribution. Unused portions of the $100,000 limit don’t carry forward to future years. The $100,000 is a use-it-or-lose-it amount.
In general, QCDs can be made only from traditional IRAs. They can be made from simplified employee pensions and SIMPLE IRAs only when the plan hasn’t received an employer contribution in the plan year that ends with or during the calendar year in which the charitable contribution is to be made. In other words, the SEP or SIMPLE IRA must be inactive.
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