22 Jan How can to set up a Qualified Charitable Distribution (QCD)
To set up a Qualified Charitable Distribution (QCD) from your IRA to a qualifying charity, follow these detailed steps and ensure you meet all IRS guidelines, limitations, and restrictions:
Steps to Set Up a QCD
- Verify Eligibility:
- Age Requirement: Ensure you are at least 70½ years old at the time of the distribution.
- IRA Type: Confirm that the distribution is from a traditional IRA or a rollover IRA. QCDs cannot be made from SEP or SIMPLE IRAs if they are ongoing (i.e., if an employer contribution is made for the plan year ending with or within your tax year).
- Select a Qualifying Charity:
- The charity must be a 501(c)(3) organization eligible to receive tax-deductible contributions. Donor-advised funds and private foundations do not qualify for QCDs.
- Determine the Amount:
- The maximum annual exclusion for QCDs is $100,000 per taxpayer. If you are married and both you and your spouse are eligible, each can contribute up to $100,000.
- Starting in 2024, the $100,000 limit will be indexed for inflation.
- Direct Transfer Requirement:
- The distribution must be made directly by the IRA trustee to the charity. You cannot withdraw the funds and then donate them.
- Coordinate with Your IRA Custodian:
- Contact your IRA custodian to arrange the QCD. Provide them with the charity’s details, including the charity’s name, address, and tax identification number.
- Ensure the custodian understands that the distribution is a QCD and that it should be sent directly to the charity.
- Obtain a Receipt:
- Obtain a receipt from the charity acknowledging the donation. The receipt should be the same type as needed if the contribution were deductible.
Original content by clergyfinancial.com. This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.