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Have you considered a charitable gift from your IRA account?

A Qualified Charitable Distribution or “QCD” from an IRA account can be a very tax-efficient way to give for individuals over 70 ½ years old.  The Lehigh Valley Community Foundation has seen this gift type grow in popularity since its benefits became permanent in 2015 and the standard deduction increased during 2017 tax reform. For those givers who are of the right age and have one or more IRAs, a QCD may be a solution to be both charity-generous and tax-thrifty.

The benefits include

  • Up to $100,000 of QCDs are excluded from gross income in a tax year, which is unlike regular withdrawals from an IRA.  The $100,000 limit applies to each individual IRA account owner, so both spouses of a married couple filing jointly can each make up to $100,000 in QCDs each year if their QCDs come from their respective IRA accounts.
  • QCDs count toward your required minimum distributions (RMDs) for the year.
  • The lower taxable income resulting from a QCD strategy has its own benefits, particularly for those tax deductions, tax credits, and benefit payments that are tied to adjusted gross income.  These may include lower taxable Social Security benefits, larger itemized deductions for medical expenses, or lower Medicare Part B and prescription drug coverage premiums.
  • QCDs don’t require that you itemize deductions to receive a tax benefit for your charitable giving, which means you may decide to take advantage of the higher standard deduction as well.

Certain rules apply, including:

  • You must be at least 70 ½ years old, and the QCD must be initiated after the half-birthday, not just the year in which you turn this age.
  • The distribution check from the IRA trustee must be addressed to the public charity, not the individual.  Some custodians mail the distribution to the individual’s home address, which is okay as long as the check is properly addressed and not deposited.
  • A distribution will be treated as a QCD only if it otherwise would be includible in gross income.
  • The QCD amount is not taxed in gross income, so you cannot claim the distribution as a charitable tax deduction.
     

ASK ERIKA | Ask me how the Community Foundation can help you create a lasting legacy and make a difference in the community....

Erika Riddle Petrozelli, CPA
Associate Vice President for Philanthropy

840 West Hamilton Street, Suite 310, Allentown, PA 18101
610 351-5353   Ext. 13 | Erika@lvcfoundation.org