Why might Qualified Distributions be for me?
Beginning the year you turn 72, making a Qualified Charitable Distribution (QCD) is a great option to lower your income taxes while doing good for others. QCDs count toward your Required Minimum Distribution (up to $100,000), effectively lowering your adjusted gross income and bringing about many tax benefits.
Why give to Friends of the Hennepin County Library?
Friends of the Hennepin County Library is the fundraising partner of Hennepin County Library with a mission to build awareness, appreciation, and financial support for our world-class library. Your donation will support youth development, community outreach, local library equity funding, and expanding our library's expansive collection.
What is a Qualified Charitable Distribution?
When individuals take distributions from their IRAs, it usually counts as income for tax purposes. QCDs, also called IRA Charitable Rollovers, are an exception. Beginning the year an individual reaches 72 they can distribute up to $100,000 each year from their IRAs to their favorite 501(c)(3) organizations without counting the distribution as income. Go to the IRS website for additional useful information on QCDs.
What is a Required Minimum Distribution?
The Required Minimum Distribution (RMD) is the smallest amount certain individuals must distribute from their IRA each year. The penalty for missing an RMD is 50% of the amount that was supposed to have been distributed.
Whether you are subject to the RMD depends on your age. Individuals are subject to the RMD beginning the year they turn 72. Go to the IRS website for additional useful information on RMDs.
What are the benefits?
- QCDs reduce your taxable income. Normally, funds that are withdrawn from a Traditional IRA count toward your annual income, which will increase your overall tax burden. In some cases, this increase 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an exception to this rule--funds go directly from your IRA to your chosen charitable organization without needing to be withdrawn, thereby helping you avoid higher income taxes.
- QCDs satisfy Required Minimum Distributions. Required Minimum Distributions (RMDs) are amounts that you must withdraw annually from your Traditional IRA once you reach a certain age. Starting the year you turn 72, you are required to take out your RMD. 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.
- QCDs maximize your charitable impact. Because QCDs do not need to be recognized as income, charitable organizations receive the full amount of your transfer tax-free. It's a win-win situation that both supports you and the causes you care about.
Have questions about making a QCD from your IRA? We're happy to help!