Thinking about your year‐end donations? If you have a retirement account and are required to take minimum distributions, you might want consider a Qualified Charitable Donation.
An IRA is a retirement savings account. You make contributions with money you may be able to deduct on your tax return, and any earnings can potentially grow tax‐deferred until you withdraw them in retirement. But, starting at age 70½, owners of traditional IRAs must begin making withdrawals, also known as minimum required distributions (MRDs), from their accounts. These withdrawals are mandatory and the distribution is treated as taxable income.
A change to the law last year allows IRA account holders to direct some or all of the required minimum distribution to charity free of tax. This is known as a Qualified Charitable Contribution (QCD).
Thanks to QCDs, a donor can now distribute up to $100,000 to a charity and count it towards his/her MRD. The benefits?
- MRD’s are taxable, but QCD’s are not reportable income to the donor which may allow some donors to avoid getting pushed into a higher tax bracket by IRA distributions.
- Generally, this approach is more tax efficient than taking the MRD as income and deducting the contribution on Schedule A.
Like most non‐profit organizations, UVLT relies on the generosity of our donors to help fund our conservation, stewardship, and administrative operations. As you think about your giving strategy for the end of the year, a QCD might be the most tax‐efficient way for you to contribute to your favorite organizations.
A QCD must be made directly from the IRA (not distributed to the donor and then forwarded to the charity). So if you’re interested in using this tool to make a contribution this year, check with your IRA administrator for instructions. Questions? Contact Leslie.Rimmer(at)UVLT.org.