By CAF America Insider Blog
The giving season fosters conversations about the ways that philanthropically-inclined individuals can support charities in the easiest, safest, and most effective manner. One of these ways is making a Qualified Charitable Distribution (QCD) from your Individual Retirement Account (IRA).
QCDs are gaining in popularity and we often receive questions about how they work, especially in the context of international giving. See below the top 5 questions our donors have asked about QCDs.
1. What is a Qualified Charitable Distribution (QCD
At age 70 ½ , you are required to start taking money from your retirement account. These are called Required Minimum Distributions (RMD) and are taxable income. If you have a Roth IRA, you are not required to take any RMDs as your savings were taxed as they went into your account.
As you begin withdrawing funds from your account, in keeping with RMDs, you are also now eligible to begin making Qualified Charitable Distributions (QCDs). A QCD is a distribution from your retirement account that goes directly to charity, instead of to yourself. The benefit of making a QCD is that it can be counted towards satisfying your RMD and does not incur income tax.
QCDs were made permanent law in 2015 with the passage of the Protecting Americans from Tax Hikes (PATH) Act.
Note: QCDs cannot be made from 401(k) accounts.