Qualified Charitable Distributions

Qualified Charitable Distributions are a good way to lower taxes by making charitable contributions using your traditional IRA. By making a charitable donation to a qualified charity directly from your traditional IRA, you can avoid taxes on that distribution. Other advantages are that you do not need to itemize deductions on Schedule A with QCDs. QCDs count toward the Required Minimum Distribution amount for IRA owners aged 73 and older. 1

To make a QCD, you should work with your current IRA custodian, as each custodian may have a different process for issuing the QCD.

It is important to understand the rules and limits.

You cannot do a QCD until after the age of 70 1/2. 1

The maximum QCD is $108,000 per person. For married couples, each can exclude up to $108,000 if each spouse is over the age of 70 1/2 when the distributions are made, and both have IRAs. 1

The charity must be a qualified charity. A qualified charity is a 501(c)3 organization/charity. You can use the IRS Tax Exempt Organization Search Tool to ensure your charity qualifies.

As stated above, donations must come directly from your IRA custodian/trustee and be made payable to the charity.

Although QCDs are not deductible as charitable contributions, the donor must still get a written acknowledgment for their contribution from the charitable organization before filing their return. See IRS Publication 526, Charitable Contributions, for more details.

You will receive a 1099R from your IRA custodian/trustee when doing a QCD, but there is no code on the 1099R to let the IRS know you did a QCD. This makes it even more important to keep good records and correctly report the QCD on your tax return. See IRS Publication 590-B, Distributions from Individual Retirement Arrangements.

I recommend, if possible, that clients do not wait until the end of the year to do a QCDs. Doing QCDs by October or early November allows time to get the acknowledgment from the charity and addresses any issues like a lost check.

Interested in learning more? Go to the Let’s Connect section and complete the form to be contacted for a free consultation.

1 Source Publication 590

Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor. Stratos Wealth Advisors and Synergy Wealth Management are separate entities.

The information in this material is not intended as tax or legal advice. Synergy Wealth Management does not provide tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.