Let’s switch gears a bit this month and talk about Qualified Charitable Distributions. QCDs are cash donations that can be made by IRA owners and beneficiaries age 70.5 and over to IRS-approved public charities. These donations must come directly out of an IRA account to qualify as a QCD. They are federal income, tax free, but cannot be treated as an itemized write-off on your Form 1040 tax form. However, the tax free element presents an immediate 100% deduction without the concern of restrictions that can simply slow itemized deductions down.
QCDs must come from you or your IRA trustee and go directly to a qualified public charity. Or, the IRA trustee can provide you with a check made out to the charity that you then must deliver. There can be no middle man action where the funds go into another account before being turned over to the charity. Looking to donate to a private foundation? You may not do so through a QCD. There is a $100,000 cap for annual QCD donations. Married couples with separate IRA accounts can both donate $100,000 respectfully.
No matter how much you donate, you must keep record of the contribution — this should be provided to you by the charity and the charity must not provide you with any token of appreciation for your generosity.
QCDs present income tax benefits as they are not considered a part of your Adjusted Gross Income, which keeps many phase out rules at bay. If you are interested in learning more about tax-saving QCD exercises, ask your accountant for specifics, or, reach out to me. I am always happy to help. You need to arrange for the proper IRA funds to go to the qualified charities of your choosing by year end so now is the time to act.
Brian E. Ravencraft, CPA, CGMA is a Principal with Holbrook & Manter, CPAs. Brian has been with Holbrook & Manter since 1995, primarily focusing on the areas of Tax Consulting and Management Advisory Services within several firm service areas, focusing on agri-business and closely held businesses and their owners. Holbrook & Manter is a professional services firm founded in 1919 and we are unique in that we offer the resources of a large firm without compromising the focused and responsive personal attention that each client deserves. You can reach Brian through www.HolbrookManter.com or at BRavencraft@HolbrookManter.com.