IRA Donations

DONATING YOUR IRA DISTRIBUTIONS TO CHARITY

Qualified charitable distributions (QCDs) have been permanently extended. Individuals can donate up to &100,000 per year directly from a traditional or Roth IRA to qualifying charities. This is attractive to some investors because QCDs can be used to satisfy required minimum distributions (RMDs) from an IRA without having the distribution included in their income. 


Eligibility

A qualified charitable distribution may be made:

  • When the IRA holder is age 70 ½  or older
  • Directly from the IRA to a qualified charity
  • From a traditional or Roth IRA

Qualified charities

Generally, a qualified charity includes most public charities that are eligible to receive tax-deductible contributions - including religious institutions, certain veterans’ organizations, fraternal societies, and community foundations that provide scholarships. 


Limitations on distributions 

Restrictions set on QCDs include the following:

  • $100,000 maximum per person per year
  • Distributions transferred to the charity no later than Dec. 31 of the current tax year 
  • Must be a direct IRA distribution from the IRA custodian or trustee to a qualified charity
  • Not all charitable organizations qualify
  • Applicable only for traditional and Roth IRA distributions (excludes SEP and SIMPLE IRAs)

Making a QCD provides an opportunity to make a charitable contribution that you might otherwise not have been able to make and/or receive potential tax benefits for charitable contributions that you are already making. You should consult your tax advisor and estate-planning attorney about your situation. Edwards Jones, its financial advisors, and employees do not provide tax or legal advice. 


Key Benefits For those who give larger gifts - Deductibility limits do not apply to QCDs, which means the QCD can be made in addition to other charitable contributions that may be limited by the annual maximum deductible percentage of income or phase-outs of itemized deductions.  For those who don’t itemize deductions - If QCDs are used as the funding source for charitable donations, the donor will receive tax benefits when there otherwise would have been none due to the use of the standard deduction.  For those who pay taxes on a portion of their Social Security benefits - Income for determining the taxation of Social Security benefits is lower than if the IRA holder had taken the RMD, potentially reducing this taxation.  For those whose income level subjects them to tax on Net Investment Income, or phase-out of personal exemptions or itemized deductions - A QCD made in lieu of an RMD will result in lower Adjustment Gross Income for the IRA holder, which may lessen the effect of this tax or applicable phase-outs.

Horizon Honors Schools has partnered with Edward Jones Financial Advisor (and Horizon Honors Parent) Jeff Schenk, CFP®, AAMS®, to help interested donors with IRA distributions. For more information, contact Jeff at 480-706-0327.

 

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