Use a Qualified Charitable Distribution (QCD) from your IRA to give more for less
- If you are at age 70½ or older, and are the owner of a Traditional IRA (or inherited Traditional IRA), you can make tax-free IRA contributions directly to qualified public charities, such as Williams.
- Each age-eligible IRA owner can transfer up to $100,000 tax-free per tax year.
- Your IRA gift must be complete on or before December 31 of the calendar year in which you choose to make a QCD for tax purposes.*
- The check must be made payable directly to Williams College.
- You can only make outright gifts. A QCD cannot be used to fund life income gifts (such as charitable gift annuities or charitable remainder trusts).
- The transfer process is quick and requires minimal paperwork.
- You can count your gift towards that year’s Required Minimum Distribution (RMD).**
- You can make a tax-free QCD beginning at age 70½, whether or not you have an RMD for that year.
- Your distribution is not recognized as income on your federal income tax return, therefore no federal income tax charitable deduction.
- Some donors save on state income taxes.
- Donors who do not itemize their federal deductions will most likely save taxes.
- Keeping your IRA distribution out of your adjusted gross income (AGI) may save you taxes in certain situations.
**Note, if you had not turned 70½ by December 31, 2019, the new SECURE Act raised the age for beginning RMD to age 72 for all retirement accounts subject to RMDs
Some donors with high AGIs can also save when:
- Subject to alternative minimum tax (AMT), and/or
- Subject to 3.8% healthcare surtax on investment income.
Some donors with low AGIs can also save on:
- Social Security taxes and/or
- Medicare premiums.
- Employer-sponsored retirement plans, such as SEP IRAs, SIMPLE IRAs, 401(k)s, and 403(b)s are generally not eligible for the IRA Charitable Rollover.
- While the IRS permits QCD gifts from Roth IRAs, using a ROTH IRA eliminates many of the tax advantages of the charitable distribution. Consult you financial or tax adviser for advice.
- Most (but not all) states exclude QCD gifts from income for state and local tax purposes.
- The 2020 SECURE Act changed the distribution rules of newly inherited retirement funds, replacing it with a 10-year rule whereby all assets must be withdrawn (beneficiaries not affected – spouse, disabled, chronically ill, individual less than 10 years younger than decedent, minor children until age of majority). Please see your advisor to discuss your personal finances and planning.