As part of your 2022 tax planning, please review the information below to determine if you are eligible for Qualified Charitable Distributions:
Guide to Qualified Charitable Distributions
If you are already planning on donating to charity, and you are over age
70 ½, we highly recommend you consider a Qualified Charitable Distribution (QCD). QCDs are “a tax-efficient way to make charitable donations.”2
The IRS defines a Qualified Charitable Distribution as “an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity.”1
This direct distribution from an IRA to a charity can count toward a Required Minimum Distribution (RMD), if applicable. When a QCD is taken to fulfill the RMD, that distribution is excluded from income, which lowers the adjusted gross income.
If you are eligible and interested, our office can assist you in initiating a QCD. It does require a form, which we will discuss with you. Please note, that if you take a distribution payable to yourself, and then make a charitable donation from your checking account, that income does not count as a QCD and is taxable.
Although QCDs and RMDs are related, as of 2020, the requirements for the distributions differ slightly. A QCD can only be made after age 70 ½, and the RMDs begin the year a person turns 72.
Please note, QCD’s can only be made to 501c3 organizations / charities.
Finally, remember to keep the charity’s acknowledgement of the donation for your tax records.
- https://www.irs.gov/retirement‐plans/retirement‐plans‐faqs‐regarding‐iras‐distributions‐ withdrawals
- https://www.investmentnews.com/article/20190108/FREE/190109955/early‐planning‐of‐ qualified‐charitable‐distributions‐produces‐better