In 2015, the US Congress passed a law that all investors age 70 ½ or older should know. The rule allows IRA owners to make Qualified Charitable Distributions (QCDs) of up to $100,000 per year directly from their IRA to a qualified charity. The $100,000 is per tax payer, so a married couple could donate up to $200,000 in a given year. Funds must be sent directly from the IRA to the charity for the distributions to qualify.
The definition of a “Qualified Charity” is fairly broad. It can be either a corporation, trust or public foundation organized and operated solely for religious, charitable, scientific, literary or educational purposes or to support amateur sports competition or for the prevention of cruelty to children or animals. Private foundations or donor advised funds would not be eligible. QCDs satisfy Required Minimum Distribution (RMD) mandates but, done properly, the income never reaches any tax forms. This means the distribution won’t impact tax brackets or, depending on the state, state tax filings. This can lead to significant federal and state tax savings.
If you or someone you care about meets these criteria, please check with your tax advisor to see if making a Qualified Charitable Distribution is the right move for 2017 and beyond.