Qualified Charitable Distributions: A Smart Way to Give

At Copper Leaf Financial we believe that tax-efficient philanthropy can enhance the benefits to everyone involved – the giver, their family, and the causes they care about the most.

A Qualified Charitable Distribution (QCD) is a tax-savvy strategy for individuals who are 70½ or older to donate to charity directly from their IRA!

Here’s how it works:

  1. Direct Donation from IRA: A QCD allows you to transfer up to $105,000 per year directly from your traditional IRA to a qualified charity. The key here is that the money goes straight to the charity and doesn’t pass through your hands.
  2. Tax-Free Withdrawal: The amount you donate through a QCD is not counted as taxable income, unlike regular IRA withdrawals. This can help lower your adjusted gross income (AGI), which might keep you in a lower tax bracket or reduce your Medicare premiums.
  3. Required Minimum Distribution (RMD): If you’re 73 or older and must take RMDs, a QCD can satisfy your RMD for the year. So, instead of taking the RMD and paying taxes, you can give that amount to charity and avoid the tax. Timing is important when you are RMD age. You must take your QCDs before you take any RMDs due to IRA distribution rules.

How to Make a QCD:

  • Step 1: Contact your financial advisor or IRA custodian (the company managing your IRA).
  • Step 2: Instruct them to transfer funds directly to the charity (or charities) of your choice.
  • Step 3: Ensure the charity is a qualified 501(c)(3) organization. It cannot be a donor-advised fund or a private foundation.

It’s a great way to meet your RMD requirements and reduce your taxable income, all while supporting causes you care about.

Although this transaction sounds simple, there are some rules you need to follow so please reach out to your financial advisor to ensure the Qualified Charitable Distribution is done correctly to avoid any taxation. It’s also important to ensure you don’t forget you also have to take your RMD if over age 73 if your QCD doesn’t satisfy the entire amount. A financial advisor will make sure your distributions are accurately completed.

At Copper Leaf Financial we help our clients with QCDs on a regular basis. To find out more about our charitable giving services click here or contact us today to schedule a strategy session.

By Breanna Sykes, CFP®, Senior Wealth Advisor, Copper Leaf Financial