Make an IRA Distribution

Taxpayers 70 1/2 or older can make an IRA transfer each year of up to $100,000 directly to charity and claim it as a tax-free qualified charitable distributions (QRD). The contribution will not provide an itemized deduction for those who itemize, but the payment of the contribution directly from the IRA account will not constitute a taxable withdrawal. Married couples, both of whom have separate IRA accounts, can each transfer up to $100,000 from their respective accounts.

For Taxpayer’s who are age 73 or older, QRDs made from an IRA Account counts toward the annual minimum required distribution (RMD).

To qualify as a QRD gift, donors must meet several conditions:

• The IRA account holder must be at least age 70 1/2 at the time the distribution is made to charity (73 to count toward the account holders MRD).
• The IRA distribution must be made as an outright gift (not to exceed $100,000) and must be made directly from the IRA custodian to the charity.
• Distributions cannot be used to fund a gift annuity or charitable remainder unitrust, and can only be directed from a traditional IRA or Roth IRA (not from a retirement plan such as a 401(k), 403(b), etc.).
• Distributions cannot be made to a donor advised fund or supporting organization (including most private foundations).
• No goods or services can be received by the donor in exchange for the gift.

The provision provides a meaningful opportunity for:

•  Individuals 73 or older who must take minimum IRA distributions but do not need the additional income
• Those who wish to make charitable gifts in excess of 50 percent of their adjusted gross income (AGI)
• Non-itemizers
• Individuals in states that do not allow charitable deductions
• If a donor made a gift from his or her IRA that meets the requirements of a QRD, then the amount distributed from the IRA to the charity qualifies as a tax-free distribution and will not be included in AGI, which prevents that amount from adversely affecting calculations that are based on AGI, such as the 3.8 percent Medicare surtax. 

QCDs must be made directly by the trustee of the IRA to the charity. An IRA distribution, such as an electronic payment made directly to the IRA owner, does not count as a QCD. Likewise, a check made payable to the IRA owner is not a QCD. Donors should work directly with their IRA custodian to request a distribution directly to charity. Please consult your tax adviser and reference the above, as other requirements may apply.

If you need more information, or if you are preparing to make a direct wire transfer charitable gift from your IRA, please contact our office at 973.736.1800 or by email to sstahl@jfr.org.

If you wish to make sure that the contribution is treated as made in the current year to count against your current year minimum required distribution, your mailing to the JFR of a check drawn on the IRA must be postmarked by December 31, or the wire initiated on or before December 31.

This information should not be treated as professional legal or tax advice and is provided for informational purposes only. Consult with your own accountant or attorney about how the tax laws apply to you. For more information, see Qualified charitable distributions allow eligible IRA owners up to $100,000 in tax-free gifts to charity | Internal Revenue Service (irs.gov)