One of the least know tax strategies is becoming more popular. The secret is out.
Qualified Charitable Distributions allows you to satisfy your Required Minimum Distribution and get a tax break for a charitable contribution.
The process is simple. Simply have your IRA custodian directly transfer some or all your RMD to a qualifying church or charity by year’s end. This helps satisfy your annual RMD and the tax break is a direct transfer and will not count as taxable income.
For example, you are past age 70½ and your RMD for 2019 is $5,000. You normally give $5,000 to your favorite charity every year. By simply directly transferring the $5,000 to the charity you will satisfy the 2019 RMD and avoid declaring the it as income. A great way to support your favorite charity, satisfy your RMD and reduce your taxable income.
• Can I give more than my RMD annually?
Yes, you can transfer up to $100,000 tax-free using a QCD.
That is $100,000 per person. So, a couple can transfer up to $200,000 tax-free. $100,000 from each of their own IRA’s.
• Can I do a QCD before age 70½?
No. To be exact you must be past age 70½ before you sign the forms to initiate a QCD. An example is you turned 70 on April 1. You must wait until Oct. 2 to start the process.
• I inherited an IRA from my father. Can I do a QCD from an Inherited/Beneficiary IRA?
Yes. However, the same age rules apply. You must be past age 70½. The age of the father does not count.
• Can I do a QCD from a SEP IRA?
The IRS does supply some guidance on this concerning if you have “an ongoing SEP IRA” or not. The simplest process is to transfer money from your SEP IRA to a regular IRA and then initiate the QCD.
A QCD has been a secret and mystery to many. However, its popularity is rising as individuals learn of its benefits.
If you have questions concerning your eligibility and the benefits of a QCD always seek the advice of competent tax, financial and legal experts.