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What’s a QCD and Why You Need To Know The Answer?

Estate PlanningQualified Charitable Distribution or QCD’s are a withdrawal from an individual retirement account that are sent directly to a charity. In other words, the funds don’t pass through your hands. You instruct your IRA custodian to send the money straight to the charity of your choosing… hopefully Idaho Humane Society. You must be 70 ½ or older at the time of the donation.

After you reach age 70½, you are required to withdraw funds annually from your IRA and report the distributions as income on your tax return. So, if you’re required to withdraw $6,000 from your IRA in 2018, that will increase your income this year by $6,000. But let’s say you are charitably inclined and plan to donate money to your favorite charity (once again, hopefully, Idaho Humane Society) If you tell your IRA administrator to send $6,000 to that charity, that contribution—in the eyes of the Internal Revenue Service—will satisfy your RMD for the year. And you wouldn’t need to include the $6,000, as you normally would, as income on your tax return.

As a result, your adjusted gross income, your taxable income—and, consequently, your tax liability—all end up being lower than they would otherwise. And you still get to support the charity you were planning to help in the first place. That’s a good deal, right!

For more information contact Jimmy Hillig, Chief Development Officer at jhillig@idahohumanesociety.org