Support FHEEFS is easier than ever for IRA Holders
If you are a retiree who is subject to the annual required minimum distribution rules for IRAs there is a strategy that allows you to take your required minimum distribution without paying income taxes on the amount AND supporting Friends of Happily Ever Esther Farm Sanctuary Inc. through the use of a Qualified Charitable Distribution. Qualified Charitable Distributions (QCDs) are not only a way to help great causes and those in need, but they are also a way to manage your tax exposure.
What Is a Qualified Charitable Distribution (QCD)?
A Qualified Charitable Distribution (QCD) is a distribution from your IRA, that goes directly from your plan’s custodian to a qualified charity.
Qualified charitable distributions can be paid to satisfy the Required Minimum Distribution (RMD) rule which starts at age 72 for traditional IRAs. And, the money distributed does not count to your Adjusted Gross Income (AGI) as it does for a regular distribution.
How Can a Qualified Charitable Distribution Save You Tax Money?
Qualified Charitable Distributions from your traditional IRA are a way to take your RMD without having to report it as income — and paying the requisite taxes.
So, QCDs reduce your Adjusted Gross Income (AGI), which generally provides a greater tax benefit than claiming the charitable contribution as a tax deduction (and you don’t need to itemize).
How Does a Qualified Charitable Distribution (QCD) Work?
QCDs are a way to reduce the tax burden of an RMD for seniors who don’t need the money as income and want to avoid being pushed into paying more taxes or a higher tax bracket.
You make a QCD by instructing your IRA custodian to pay part or all of your RMD to a qualified 501(c)(3) charity.
What Are the Rules for QCDs?
The rules for QCDs aren’t very complicated, but there are some:
To make a qualified charitable distribution you have to be 70½ or older.
For a QCD to count towards your current year’s RMD, the funds must come out of your IRA by your RMD deadline. For most folks that’s December 31.
The maximum annual amount that can qualify for a QCD is $100,000. That goes for one big contribution or many smaller contributions — the total yearly max is $100K.
Who Can Give Qualified Charitable Distributions?
Anyone with a traditional IRA who is 70½ or older than can make a QCD. However, QCD rules only apply to IRAs — they do not apply to 401(k)s, 403(b)s, SIMPLE, or SEP IRAs.
Who Can Receive Qualified Charitable Distributions? For tax purposes, qualified charities are defined by the IRS. The IRS has a handy tool that lets you look up a charitable organization to see if it is registered and can accept donations.
Can Couples Both Max Out Their QCDs?
Yes. QCDs are capped at $100,000 per person, per year. For a married couple where each spouse has their own IRA, each spouse can contribute up to $100,000 from their own account. So, if you are married, each spouse can contribute up to $100,000 from their own IRAs for a big donation of $200,000.
What Are the Taxes on QCDs?
Unlike the distributions from your traditional IRA, there is no federal or state income tax on distributions made to qualified charities. Another great thing about QCDs is you don’t have to itemize your tax return to benefit from one. Of course, the IRS won’t let you double dip. Though your QCD amount is not taxed, you can’t also claim the distribution as a charitable tax deduction.
Please consider a donation to Friends of Happily Ever Esther Farm Sanctuary Inc. through the use of a Qualified Charitable Distribution. You will avoid income taxes while helping to support our very important mission of supporting Happily Ever Esther Farm Sanctuary and other organizations with a similar mission of encouraging kindness to farmed animals.