News & Media

Exploring the Qualified Charitable Distribution: A Simple, Tax-Smart Way to Give.

Jenny Wilson | July 15, 2019

If you give to charity chances are you're already aware that your gift can have a positive impact on your taxes. While tax savings is a welcome benefit, it's generally not the "why" associated with giving, but it is an important consideration in addressing the "how" of giving.

Beginning at 70 1/2 years old the IRS compels individuals to withdraw funds from their IRAs. Why you might ask? The answer is simple - taxes! In most cases, the funds inside an IRA have never been subject to federal or state income taxes. Once the account owner begins taking withdrawals, however, the distributions are taxable. Also, starting in 2018 with the implementation of the Tax Cuts and Jobs Act, many taxpayers are no longer eligible to itemize their tax deductions, including deductions for charitable giving, because of the significant increase to the standard deduction.

Enter the Qualified Charitable Distribution (QCD). A QCD is a great way for individuals (age 70 1/2 +) with an IRA and a need to withdraw funds to meet a Required Minimum Distribution (RMD) to make a charitable gift. The money contributed using a QCD is not included as taxable income on an individual's tax return. This lowers the taxable income of the donor thus saving federal and state income taxes on the amount gifted. This result is often better than making a tax-deductible contribution.

Qualified Charitable Distribution benefits include:

  • The gift comes from the IRA using pre-tax dollars
  • The gift amount is excluded from taxable income
  • The gift amount can be applied towards this year's minimum distribution requirements

Basic requirements and limitations for a Qualified Charitable Distribution include:

  • The donor must be at least 70 1/2 years of age at the time of the distribution
  • The distribution must be made directly from the account administrator to a qualifying charity
  • Qualified Charitable Distributions are limited to $100,000 per individual per year (a spouse who qualifies may give the same amount from his/her IRA)

Sailer Financial believes that charitable giving is a personal decision, and the "why" of giving is unique to each individual and family. We're here to help with the "how" of giving. If you have questions or would like to explore strategies, including a QCD, to maximize the tax benefits of your charitable giving give us a call at 615-370-1253 or click HERE to send us a message.

Jenny Wilson, CFP®
Director of Financial Planning

The foregoing is intended as general information only and is not legal, tax, or other professional advice. Donors and others should consult a tax professional for specific legal or tax advice on this matter.

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