If you are age 70 ½ or older, you may make gifts called qualified charitable distributions (QCDs) directly from an individual retirement account (IRA) to Brother Rice. Here are five reasons why giving from your IRA might be a good idea this year.
- Giving directly from your IRA—rather than withdrawing these funds—won’t increase your adjusted gross income or subject your Social Security income to more taxes.
- Such gifts can count toward all or part of your annual required minimum distribution (RMD). While IRA owners age 70 ½ or older can make gifts directly to charities from IRA’s, the minimum age for taking RMDs has increased to 72.
- QCD gifts can be especially advantageous for those who do not expect to itemize their deductions and for those whose deductions are limited.
- You can make QCD gifts in any amount up to $100,000 per person per year or $200,000 for a couple with separate IRAs. Because of recent tax law changes, you may be able to continue to add to an IRA after age 70 ½. If this is your situation, the amount of the CDQ gifts you can make will be reduced.*
- The QCD is only possible with an IRA. It is possible to roll funds from other retirement plans into IRAs to take advantage of a QCD. Some people choose to simply make charitable gifts with their retirement plan withdrawals—whether IRA, 401(k), 403(b) or other similar arrangements. When doing this, you will recognize income on your tax return but you also can deduct the amount of your gift.
*As a result of the SECURE Act, if an individual with earned income continues to make deductible contributions to an IRA beyond age 70 ½, the individual’s maximum QCD amount will be reduced by the amount of deduction claimed for an IRA contribution.