A qualified charitable distribution (QCD), also known as an IRA charitable rollover or IRA charitable distribution, is a transfer of funds from your IRA to a qualifying charity (like the Wisconsin Equal Justice Fund). It allows individuals who are 70½ years old or older to donate up to $100,000 total to one or more public charities per year directly from their taxable individual retirement account (IRA) rather than taking the required minimum distribution (RMD). Distributions over the $100,000 total for the year are taxed as ordinary income. For married people, each spouse can make QCDs up to the $100,000 limit for a potential total of $200,000 per year.
Required Minimum Distribution
People who hold IRAs must take RMDs each year beginning at age 72, even if they don’t need or want the funds. That RMD increases the IRA holder’s total taxable income. That income could potentially push the taxpayer into a higher income tax bracket. It can also trigger phaseouts, which limit or eliminate some kinds of tax deductions, such as personal exemption and itemized deductions, and sometimes trigger high taxes on social security income.
QCDs don’t increase taxable income, so you can avoid both higher tax rates and phaseouts. Additionally, because QCDs reduce the balance of the IRA, they may reduce RMDs in future years.
How to Make a QCD
QCDs are made directly to the eligible charity from the IRA. Either the IRA custodian sends a check directly to the charity or to the account owner, who then gives it to the charity. Donors cannot receive any benefit for making a QCD to a charity, so, for example, tickets to the WEJF Eisenberg Dinner cannot be purchased with a QCD.
A QCD may be right for you if you are 70 ½ years old or older and want to:
- Make a tax-free withdrawal.
- Provide a charitable gift under the $100,000 QCD limit.
- Satisfy your RMD for the year.
- Reduce your taxable income, even if you do not itemize deductions.
- Make a charitable contribution that is not subject to the deduction limits on charitable gifts.
Please consult a tax professional for guidance about your particular circumstances.
Contact your IRA plan custodian to make a gift from your IRA to WEJF. The Wisconsin Equal Justice Fund’s EIN is 39-1904737.