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Qualified Charitable Distributions


Individual Retirement Accounts, which are more commonly known as an “IRA,” is a popular planning tool that allows individuals to set aside money for retirement, as contributions to IRAs are often tax deductible. However, distributions from IRAs are generally taxable in the year a beneficiary receives them.

One of the exceptions to taxable distributions from an IRA is a qualified charitable distribution. A qualified charitable distribution is a distribution from an IRA that is not taxable up to $100,000 per taxpayer per tax year, if the distribution meets certain requirements:

1) taxpayer must be at least 70 ½ years old at the time the distribution is made;

2) the distribution is made directly from taxpayer’s IRA (not SEP or SIMPLE IRA);

3) the distribution is made to a qualified charity; and

4) all applicable documentation is obtained and filings are made.

The $100,000 limit per year can be made from multiple IRAs owned by the same taxpayer, as long as the aggregate distribution amount made from all the IRAs does not exceed $100,000. Spouses filing jointly have an exclusion limit of $100,000 each, so a married couple can make a combined charitable distribution of up to $200,000, tax-free.

Individuals should take care that the distribution is made directly from the IRA. If a distribution is made to a beneficiary, and then the beneficiary gives that amount to charity, it is not a qualified charitable distribution.

Even if a charity is eligible for public charity tax deductions, not all qualify for qualified charitable distributions. Donor advised funds and supporting organizations do not qualify for the exclusion. Once a contribution is made to a charity, the charity should provide a receipt or acknowledgement of the donation and the taxpayer should file the proper forms to qualify for the exclusion.

If you want to avoid becoming ineligible for certain government benefits due to required minimum distributions you must take at age 70 ½ increasing your taxable income, qualified charitable distributions could be a possible avenue for you to do so, while supporting a charity you believe in. Vogt, Resnick & Sherak, LLP can work with you to ensure any such charitable distributions from your IRA qualify as a qualified charitable distribution. Please contact us if you have any questions.