Charitable contributions are a common financial goal. One of the easiest and most tax efficient ways to do this is to do a Qualified Charitable Distribution (QCD) from your IRA. In order to do this, you must meet specific requirements which include age, dollar amount, and the type of charities you can contribute to. Read below to see if you qualify for making a Qualified Charitable Distribution from your IRA.
Do you have a traditional IRA, inherited IRA, inherited Roth IRA, SEP IRA, or SIMPLE IRA that is subject to an RMD?
If you do not have a required RMD, you will not be eligible for a QCD. If you do have to take an RMD from any of the IRA types listed above, move on.
Are you at least 70.5 at the time you plan to make the Qualified Charitable Distribution?
Those under 70.5 will not be eligible to make a QCD. This means even if you have an inherited IRA subject to RMDs, the QCD may not be available to you. If you are over age 70.5, move on.
Is the IRA actively receiving any employer contributions (SEP IRA or SIMPLE IRA)?
If you answered “yes”, you unfortunately will not be eligible for the QCD. If you are not still receiving employer contributions, move on.
Is the recipient a private foundation or donor-advised fund?
Qualified Charitable Distributions can not be done through a private foundation or donor-advised fund. If your intended charity is not private or donor-advised, then you will be able to make a QCD. The amount of the QCD cannot be greater than $100,000 per year ($200,000 for married couples).
Qualified Charitable Distributions have to be done correctly, else they can have large tax consequences. Check out this flowchart to learn more.
If you have questions regarding Qualified Charitable Distributions or other general retirement planning advice, please give us a call at 303-440-2906 or click here to schedule a time to speak with us.
Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail firstname.lastname@example.org.
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