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[Video] Qualified Charitable Distributions

by Steve Smalenberger / December 1, 2017

STEPHEN SMALENBERGER, EA

Maybe you’re thinking of a way to support a not-for-profit or charity that you believe in.  Here’s another way to do that with something you already have; your traditional IRA.  This is known as a Qualified Charitable Distribution (QCD).  We’ve talked about IRAs before and how when you take money out it’s taxable.  At age 70 ½ you have to start taking distributions, but maybe you don’t have anything to do with that money.

You could spend, save, reinvest, give, donate, or leverage it. We are going to talk about donating it, in this video.  One way to do this is to take the money out of your IRA, then give the funds to the charity.  In this case you would be taxed on the distribution of the funds because they are coming to you first.

But there is another way, a better way, if your goal is to donate the funds.  In this second scenario the funds come from your IRA and go directly to the organization you wish.

There are some specific rules to think about in this scenario:

  1. You have to already be 70 ½.  
  2. You can give funds away up to $100,000 each year in this manner.  This rule is $100,000 per IRA owner.  So for a husband and wife with their own IRAs you could give up to $200,000.  Any funds in addition to this would be taxable as a distribution from your IRA.
  3. The funds have to be going to a public charity, a 501 c(3) organization.
  4. The gift is an irrevocable gift.  This means you can’t take the gift back after it’s been completed.

If you’re interested in doing this be sure to talk with your financial advisor to understand the timing for how to accomplish this and any deadlines for when to complete this by.

 

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Steve Smalenberger

Steve enjoys getting to know clients and hear their unique stories and the lessons learned which has brought them where they are today. One of the reasons he enjoys what he does is the ability to show the outcome that can be achieved with different choices. He also enjoys continually learning.