Money from a traditional individual retirement account (IRA) can be donated to charity as non-taxable income. This is accomplished by making a Qualified Charitable Distribution (QCD).
Under most circumstances a distribution from a traditional IRA is taxable, since the account holder didn’t pay taxes on the money as it went into the account. However, taxpayers who are at the age of having Required Minimum Distributions (RMD), can make a contribution directly from a traditional IRA to a qualified charity. This will also lower the donors adjusted gross income, and count as an RMD.
Here are guidelines for executing this transaction
- Each person can donate the full amount of their RMD up to $100,000
- Work with your IRA custodian to conduct a QCD
- Inform your tax preparer that you made a QCD
- You can make a QCD that exceeds your RMD for a given year
- You can distribute the money to multiple charities
- Donors cannot receive any charity benefit for making a QCD
- Deadline to make a QCD is December 31st
- The charity organization must be a 501(c)(3), or exempt from federal income tax
- The first money out in a given year is considered to be the RMD