Qualified Charitable Deductions (QCD)

Rick has written on the benefits of giving to charity from your IRA, a Qualified Charitable Deduction (QCD)  if you are over age 70½.  You do this by giving the gift directly from an IRA to the charity of your choice.

The big advantage is that the QCD qualifies as an RMD, which means you don’t pay any income tax on it. Even if you need 100% of your RMD for living expenses, your gift is still tax free if you take the standard deduction. The only case where this doesn’t give you a tax advantage is if you spend 100% of your RMD and you itemize deductions.

If you do a QCD, here is a very important step in assuring the gift is tax deductible.  You must tell your accountant!  TD will report the withdrawal as taxable (they have no other choice). The IRS has no way of knowing this distribution was a QCD.  There is no place on the tax return to note this is a QCD.  The only way is if you accountant enters your total  distributions, adjusts for the non-taxable portion, and writes “QCD” on the return. Clumsy and inefficient? Yes.  But it’s imperative to getting the deduction.

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