By Catherine French McGill,
JD, CAP®, AEP®
Gift Acceptance Manager
Omaha Community Foundation
A Charitable IRA Rollover, also known as a Qualified Charitable Distribution (QCD), is a distribution from an IRA to a qualified charity. The donor must be 70½ or older to make a QCD. A QCD is not taxed, nor is it included in the donor’s taxable income.
This tax planning technique not only helps nonprofit organizations who receive the funds but can also lower the donor’s adjusted gross income while also reducing the required minimum distributions (RMD) that can increase the donor’s income (for those who are required to take an RMD).
Below are fast facts to help you and your clients get the most out of this tax-savvy way to donate IRA assets to charity.
1. Name the charitable recipient
The QCD must go directly from the IRA account to a qualified charity, like certain funds at the Omaha Community Foundation. Your client cannot receive the funds directly from the IRA and then make the donation directly.
2. Deferred income
While donors do not receive a charitable income tax deduction for taking a QCD, QCDs are excluded from the donor’s taxable income and count toward the donor’s RMD for those who are required to take RMDs.
3. Giving More
A donor does not need to itemize deductions on their tax return to take advantage of a QCD. QCDs operate separately from the percentage rules that limit the tax benefits of individuals who are charitably giving. So, if your clients are inclined to give more than the standard deduction, a QCD is a great option. This strategy may provide greater tax savings than a cash donation by lowering the donor’s adjusted gross income.
4. How the Omaha Community Foundation can help
The simplest way to make a Qualified Charitable Distribution from an IRA is to name a qualified fund at the Omaha Community Foundation as the nonprofit recipient, and we can take it from there. For example, if a donor wants to donate $100,000 annually from their IRA but does not want to distribute it to the nonprofit recipient all at once, or if the donor wants to give different amounts to multiple nonprofits, a fund at the Community Foundation can be structured to accomplish these objectives.
Please contact OCF’s Donor Services team at 402-342-3458 or giving@omahafoundation.org if you have questions about how your clients can use their IRAs to support their favorite charitable causes.
Disclaimer: This article provides an overview of the possible tax advantages of donating various types of assets and is not intended to provide tax or legal guidance. The Omaha Community Foundation recommends discussing these strategies with an accountant, financial advisor, or attorney.
