Donating to charities and over age 70 ½ ? Do it in a tax efficient way!


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Many people, especially in retirement, choose to give some of their savings to charities that are close to their hearts.

Whether that is weekly tithings to the church, monthly recurring donations to your alma mater, or holiday giving at the end of the year, if you are over age 70 ½, there is a very tax efficient way to go about these donations!

IRAs: QCDs (Qualified Charitable Distributions)

Many people, especially in retirement, choose to give some of their savings to charities that are close to their hearts. If you are over age 70 ½, there is a very tax efficient way to go about these donations!


The Advantages of Qualified Charitable Distributions

QCDs, or Qualified Charitable Distributions, are a direct transfer of funds from a qualifying account to a qualified charity.

The largest advantage of QCDs is that they satisfy requirement minimum distributions (RMDs) while also being tax free.

You can learn more about RMDs here, but basically, once you turn 72, the government is going to make you start taking a certain amount of money out of your retirement accounts, such as IRAs and 401ks, every year. There is a very large penalty for not taking the correct RMDs.

Why does the government require these distributions? The money in accounts with RMDs has not been taxed yet and they want to make sure that they get their money.

The great thing about QCDs is that, if done correctly, you do not have to pay taxes on this money.

There are some rules you need to follow when making a qualified charitable distribution:

1. A QCD must be made from certain accounts

There are requirements for what type of account you can make a qualified charitable distribution from. The accounts that qualify for this type of distribution are traditional IRAs, inactive SEPs and SIMPLE IRAs, Rollover IRAs, and Inherited IRAs.

Roth IRAs are technically allowed, but only pre-tax amounts can be used for QCDs, so most Roth IRAs are not going to qualify.

Roth IRAs really shouldn’t be used for QCDs anyways as the money in Roths has already been taxed. Roth IRAs also do not have RMDs. You do not get the advantages that come from QCDs with Roth IRA accounts.

A QCD cannot be made from a 401(k), but you can roll the money over from a 401(k) to an IRA and then make the distribution from there.

This is confusing, and you will want to make sure you work with a professional to make sure you do not make any costly mistakes.

2. A QCD must be a direct transfer to a qualifying charity

The charity that you donate to must be a 501(c)(3) organization and they must be eligible to receive tax-deductible contributions.While most charities that people donate to regularly will meet these requirements, some charities, such as private foundations or donor-advised funds, will not be eligible to receive QCDs.Another requirement is that the money must directly transfer from your retirement account to the charity.

For example, you cannot take the money out, put it in your account, and then give it to the charity. If you did this, the money would then be taxable and you would not get the advantages that QCDs provide.

Especially if you are transferring a large sum of money, make sure you work with a professional who can guide you through the requirements. If a mistake is made, it could cost you a lot in taxes.


Listen to learn more about QCDs:


3. A QCD cannot exceed $100,000 for the year

Per year, there is a limit of $100,000 for a QCD. This limit is per person. If you are in a couple, you can each take advantage of this and essentially the limit is raised to $200,000 per year.

Do note, QCDs can be done with much smaller amounts. We help people do anywhere from $500 to $10,000 to $75,000 donations depending on the client and their personal situation.

4. A QCD can be made starting at age 70 ½

Due to the recent passage of the Secure Act, the age that required minimum distributions start is now age 72. It previously was age 70 ½ .

Even with this change, QCDs can still be made starting at 70 ½.

This is great for people who have a large amount of money in their IRA. Not only can you take this money out tax free, it will also reduce the amount of future RMDs you will be required to take when you turn 72 since your account balance is lowered by the charitable donations.


To summarize, QCDs allow you to meet your RMD requirements in a tax advantaged way. If you are making regular donations to charities and over age 70 ½ , you really need to consider utilizing QCDs to make your donations.

Cardinal can guide you through the process of making QCDs correctly.

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