The Simple Part
If you are over 70 ½ and you are an IRA owner and/or the beneficiary of an inherited IRA, we strongly encourage you to investigate the potential benefits of using QCDs for some or all of your charitable donations. QCDs allow you to donate directly out of your IRA(s), up to $100,000 per year, to qualified non-profits without paying income tax on the distribution and, importantly, without including the distributions in your Adjusted Gross Income (AGI) on your income tax return. The exclusion from AGI for QCDs provides a tax-effective way for taxpayers who use the standard deduction, rather than itemized deductions, to make charitable donations. QCDs also count toward satisfying any required minimum distributions (RMDs) that you would otherwise have to receive from your IRA(s).
The Complicated Part
Changes in AGI reverberate through calculations of taxable income, marginal tax rates, taxation of social security, Medicare premiums and various other taxes and credits. Effectively, the shift of IRA distributions out of your AGI increases the attractiveness of using IRA assets for a one-time donation or as part of a larger philanthropy, tax and estate planning strategy. Due to the complexity of the impact of QCDs, we encourage you to work through some personalized scenarios with your CPA and/or tax planner to see what benefits they could provide to you.
There are a variety of detailed rules that apply to QCDs and QCD reporting that we recommend you review with your CPA and/or tax planner. For example: Donor Advised Funds (DAFS) are not eligible recipients for QCDs; receipts for donations from the non-profit recipients must be collected and retained; post 70 ½ deductible IRA contributions will be deducted from the amount eligible for QCD treatment; and, since 1099R distribution tax forms do not backout QCDs from total distributions, it is important to communicate with your CPA about your QCD donations. Here is a link to information on QCDs on the IRS website: Publication 590-B (2019), Distributions from Individual Retirement Arrangements (IRAs) | Internal Revenue Service (irs.gov) (and tab down the index to “Qualified Charitable Distributions”).
Finally, as you are thinking about gifting strategies, we invite you to consider making a QCD to SVP Boulder County and/or including SVP in your planned giving through your estate and creating A Legacy of Impact (SVP Boulder County » Planned Giving (socialventurepartners.org).
The SVP Giving Committee