Qualified Charitable Distributions

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If you have tax-deferred retirement accounts, the IRS requires you to begin to take taxable distributions from these accounts each year at age 72. These are called Required Minimum Distributions (RMDs). The RMD’s are generally taxable and thus can significantly increase your income taxes each year.

However, there is a great way to avoid paying taxes on some or all of your RMDs by sending them directly to a charity such as the Severn River Association as a Qualified Charitable Distribution (QCD). You can begin to make QCD’s when you turn 70 ½. To be clear, QCD’s count toward your yearly Required Minimum Distribution (RMD) and thus can possibly eliminate each year any taxes that otherwise would be due on your RMD.

Each taxpayer is allowed to directly transfer (contribute) up to $100,000 from an IRA account each year. So, if you are married and both spouses have an IRA, the total contribution can be as much as $200,000 – all of which would be tax-free.

The general requirements related to the Qualified Charitable Distributions are as follows: 

  • The QCD must come from a Traditional or Inherited IRA. So, you can’t use a 401(k) but you can rollover the 401(k) into an IRA and then make the QCD)
  • You must be 70½
  • The distribution must go directly to a qualified charity. You cannot pay the funds to yourself and then write a check to the charity. Most brokerage accounts will provide you with a checkbook so you can write the check directly from the IRA account.
  • You must receive a confirmation letter from the charity that states no goods or services were received in exchange for the contribution (SRA will send this to you).

Please consult with your financial planner to be sure a QCD makes sense for your circumstances.

Mailing Address: PO Box 146, Annapolis, MD 21404

Tax Identification Number: 52-1827749