Did you know the gift of a Qualified Charitable Distribution (QCD) benefits donors aged 70 ½ and up?
Thinking about making a financial gift to charity? Looking for ways to reduce your taxes? If you’re retired and have IRA assets, the qualified charitable donation (QCD) tax rule might work in your favor. The Qualified Charitable Distribution is an excellent way to show your support for Delaware Hospice and receive tax benefits in return. You receive a tax benefit even if you take the standard deduction!
The QCD rule allows IRA owners or those who have inherited an IRA to exempt their required minimum distributions (RMDs) from taxation through direct charitable giving. It’s especially pertinent given recent tighter rules on itemized deductions. Here’s what you need to know to benefit from QCDs.
“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 advisor,” notes Kathy Bauers, Point to Point Wealth Planning.
- You must be 70 ½ or older at the time of gift.
- Distributions must be made directly from a traditional IRA account by your IRA administrator.
- Gifts must be outright, meaning they go directly to Delaware Hospice. 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 advisor 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.
Point To Point Wealth Planning, A private wealth practice of Ameriprise Financial Services, LLC contributed to the information in this article. Please contact your tax advisor for assistance or confirmation.