Over Age 70 ½? Pay Your Pledge with a QCD!

If you are over age 70½ and drawing your required minimum distribution (RMD) from a retirement plan, you should be aware of the benefits of a qualified charitable distribution (QCD) to pay your pledge to UUCT and other charities.

QCD’s have been around since 2006 and were made permanent in 2010.  In essence, QCD’s are a means for you to lawfully deduct charitable donations from your income even if you normally do NOT itemize deductions on Schedule A of your tax return (i.e., you take the “standard deduction” on line 12 of your 1040-SR).  Instead, QCD’s are deducted from the gross reported RMD on line 4 of your 1040-SR.  (Line 4a is “IRA distributions”.  Line 4b is “Taxable amount.”  The difference between these two is your taxable RMD).  So if your full RMD is $15,000 and your pledge to UUCT is $5,000, your QCD is $5,000 and the taxable portion of your RMD is $10,000.

If you prepare your own tax return, programs like Turbotax will walk you through the RMD and QCD process as part of the RMD from your IRA, populating your return automatically.  If you use an accountant to prepare your return, be sure to notify him or her of your QCD’s.

There are a couple of caveats to QCD’s.  

First, they are only deductible from individual IRA’s – not from SEP IRA or 401k plans.  If your retirement funds are tied up in one of the latter plans, you should definitely consider converting them to an individual IRA to take advantage of the very substantial QCD benefits.  

Second, the charitable check(s) must be prepared by your IRA plan administrator and made payable directly to the charity – though you can have the checks delivered to you for forwarding to the charity.  The checks cannot be written by you with funds you withdraw from your IRA.   Plan administrators are well aware of QCD’s and should prepare those checks to your chosen charities at no charge to you.  

Want to learn more about RMD’s and QCD’s?  Contact UUCT Treasurer Ron Clark at rclark1040@gmail.com.