Header Section

#GivingTuesday: Take Advantage of Qualified Charitable Distribution Before Year-End

If you are an IRA owner and are over age 70 ½ this year, you have to take your required minimum distribution (RMD) by December 31, 2013. If you want to give money to charity this year and haven’t yet taken your IRA RMD, you should consider giving your RMD directly to the charity.

IRA qualified charitable distributionA provision in the tax code known as Qualified Charitable Distributions (QCDs) allows you to give your IRA distribution directly to charity and save taxes. Here’s how it works. Normally, any IRA distribution, including your RMD, is taxable to you, but QCDs are tax-free as long as certain rules are followed.

Under the IRA QCD rules, if you are actually age 70 ½ or older on the date of the distribution, you can give your RMD or any amount up to $100,000 to a qualifying charity. The IRA funds must be transferred directly to the charity. The charitable donation from your IRA can satisfy your RMD for the year. You can’t take a tax deduction for the charitable contribution, and you can’t receive anything in return from the charity for the donation. QCDs apply to IRAs, Roth IRAs, and INACTIVE SEP and SIMPLE IRAs. They must come from pre-tax amounts only; this is an exception to the pro-rata rule. They don’t apply to employer retirement plans such as a 401(k).

The reason why you likely will save taxes using a QCD is because it’s a tax-free distribution. Because it’s tax free, it won’t increase your adjusted gross income (AGI) and thus won’t affect items on your federal income tax return that are negatively impacted by higher AGI, such as itemized deductions and personal exemptions.

QCDs will expire at the end of 2013
Unless Congress reinstates or extends QCDs, they will expire on December 31, 2013. Congress has reinstated QCDs over the past several years, so hopefully they’ll do so again. But until that time, talk to your tax advisor before year end to see if you should send your IRA RMD directly to a charity to save taxes.

This is the first post of The Slott Report's "Best of 2013" week. We will be posting some of our most popular articles throughout the week. New articles will return next week.

- By Joe Cicchinelli and Jared Trexler


I thoroughly enjoy supporting charities. As the charter president of our Lions Club I know there is much work involved.

As this opportunity to donate directly from one's IRA has restrictions and is not appropriate for everyone, I strongly encourage working with an advisor who is highly trained. The advisors who participate and have maintained their training in the Elite IRA Advisor group, in my opinion, meet that criteria.

If you think you might be interested in this option and have question - I would enjoy supporting you in your efforts. I offered this service, free of charge, to my clients and their families.

If you would like support - I'll extend my offer to you too. Simply call my office to set a time for us to speak. Call, toll-free, 866-589-9366.

To be fair, we should be underway with this before December 20, 2013 - even that is a challenging deadline.

If it is for charity - I'm in!

Rick Loek
Onesta Wealth Management, LLC.
Onesta is a California registered investment adviser and can transact business in a various states, where authorized by law.
We are located in the greater San Jose area.

Happy Holidays and Happy New Year to you and your family

Post a Comment