If you are charitably inclined and have an IRA, a Qualified Charitable Distribution (QCD) can be a great strategy. With a QCD, you can move IRA funds to the charity of your choice tax-free. Here are 12 QCD rules you must know.
- QCDs are only available to IRA owners or beneficiaries who are age 70½ or older.
- The maximum QCD amount is capped at $105,000 per person, per year.
- Under the SECURE 2.0 Act, a one-time QCD of $53,000 (for 2024) can go to a split-interest entity, such as a charitable remainder annuity trust, charitable remainder unitrust or a charitable gift annuity.
- Donor-advised funds do not qualify for QCDs.
- A QCD can satisfy your required minimum distribution.
- No double dipping is allowed! You cannot do a QCD and also take a deduction for the charitable contribution.
- If you are married, you and your spouse can each contribute up to $105,000 from your own IRAs.
- The contribution to the charity would have had to be entirely deductible if it were not made from an IRA. You cannot receive a benefit back.
- The distribution from the IRA to a charity can satisfy an outstanding pledge to the charity without causing a prohibited transaction.
- The charitable substantiation requirements apply. The charity will send you a written statement/receipt called a “contemporaneous written acknowledgment.”
- QCDs can be done only with the taxable amounts in your IRAs.
- QCDs cannot be done from SEP or SIMPLE IRAs that are actively receiving contributions.
Copyright © 2024, Ed Slott and Company, LLC Reprinted from The Slott Report, Wednesday, July 10, 2024, with permission https://irahelp.com/slottreport/12-qcd-rules-you-must-know/. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.