Advisor's Corner

Advisor’s Corner: IRA RMD QCD—Alphabet Soup or Smart Giving Option?

A Qualified Charitable Distribution (QCD) is a direct transfer of funds from a traditional IRA account to a public 501c3 nonprofit, such as the Community Foundation. A QCD can count as all or some of the IRA owner’s required minimum distribution (RMD), and the QCD amount is not added to taxable income as an RMD normally would be. 

The QCD is an effective smart giving option, particularly for those who take the standard deduction and would miss out on writing off charitable contributions. But even those who itemize can benefit from using a QCD because keeping taxable income lower may reduce the impact of other tax credits and deductions, including Social Security and Medicare.

Right: Collins Andrews of Little Rock, Arkansas made a gift from his IRA to the Community Foundation to create a fund that will continue to support the causes he and his family care about most. 

Here are some things to remember about IRA qualified charitable distributions:  

  • A donor must be 70½ or older to be eligible to make a QCD.
  • The amount gifted to charity is not counted toward the donor’s ordinary income.
  • Donors can request multiple direct transfers from their IRA to qualified charities in a year, but only up to $100,000 can be excluded from income as an IRA QCD 
  • If a client is married, their spouse is also eligible to contribute up to $100,000 from their IRA
  • The QCD must come directly from the instituti on holding the IRA account (IRA checkbooks are ok) to a designated or unrestricted fund at the Community Foundation. Funds distributed directly to IRA owners which they in turn give to charity do not qualify as QCDs.
  • Because the IRS counts the first distribution from an IRA each year towards satisfying the RMD requirement, a QCD should be directed first before taking the RMD to ensure that the QCD satisfies that obligation. 

Qualified charitable contributions from an IRA cannot be gifted to donor-advised funds, supporting organizations, private non-operating foundations, charitable gift annuities or charitable remainder trusts.

Click here to to learn more about gifting an IRA QCD to the Community Foundation. 

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Hot Springs Village residents Jim and Becky Gifford used an IRA QCD to create a Community Foundation designated fund for the charities they love. Gifford explains that the attraction to him was the ability to make almost all of his charitable donations tax-exempt. “We support various charitable causes throughout the year.  With our charitable fund, we estimate our total annual giving, make one IRA withdrawal each into our fund with Arkansas Community Foundation, and use that to make donations to our list of charities.”