What are Qualified Charitable Distributions?

Qualified Charitable Distributions (QCDs) are distributions from your Individual Retirement Account (IRA) made directly to a qualified nonprofit organization without having the distribution counted as taxable income.

QCDs are also sometimes referred to as IRA Charitable Rollovers.

Up to $100,000 in IRA funds can be counted as QCDs annually, or $200,000 for married couples.

Who is eligible?

If you are 70½ years of age or older and have a Traditional IRA, you are eligible to make a QCD using FreeWill.

What are the benefits?

QCDs can reduce your income taxes– Normally, funds that are distributed from a Traditional IRA are includible in your taxable income, which is likely to increase your overall tax burden. In some cases, this additional income may also move you into a higher tax bracket. However, QCDs are an exception to this rule—funds go directly from your IRA to your chosen charitable organization without going to you first, thereby lowering your adjusted gross income and effectively reducing your income taxes.

QCDs can satisfy Required Minimum Distributions–Required Minimum Distributions (RMDs) are amounts that you must withdraw annually from your Traditional IRA once you reach 72 years of age.  If you do not withdraw your RMD, you will face a penalty tax of 50% of the required withdrawal amount. QCDs can be used to meet this RMD requirement and avoid penalties.

Read more about RMDs on the IRS website

QCDs maximize your charitable impact- Because in most cases QCDs do not need to be recognized as income, charitable organizations receive the full amount of the transfer tax-free.  It’s a win-win situation that both supports you and the causes you care about.

Contact your financial advisor to see if a QCD achieves your goals.