The Tax Cuts and Jobs Act of 2017 made tax law changes that may impact tax incentives for donors to charitable organizations. However, the rules around the Qualified Charitable Distribution (QCD) remain unchanged and is an effective way to give in a tax-favorable manner.
Summary of qualified gifts:
You are age 701⁄2 or older at the time of the gift.
You transfer up to $100,000 directly from your IRA. This applies only to IRAs and no other types of retirement plans.
You transfer the funds outright to one or more qualified charities. Transfers to charitable trusts, donor advised funds, charitable gift annuities, private foundations, or supporting organizations are not permitted.
Frequently Asked Questions
Q. Can my gift be used as my minimum required distribution under the law?
A. Yes. If you have not yet taken your required minimum distribution, the QCD can satisfy all or part of that requirement. Any amount that is donated in excess of your RMD does not create any additional tax benefit, and the excess is not eligible to be carried forward.
Q: Should I make a QCD or just write a check/give appreciated shares to the qualifying organization I wish to support?
The new tax changes make it less likely that donors will itemize deductions, instead opting to claim a higher standard deduction.
For that reason, it may be more tax-effective to make a QCD as any amount processed as a QCD counts toward your RMD requirement and reduces the taxable amount of your IRA distribution. This lowers both your adjusted gross income and taxable income, resulting in a lower overall tax liability.
Q. I'm turning age 701⁄2 in a few months. Can I make this gift now?
A. No. The legislation requires you to reach age 701⁄2 by the date you make the gift.
Q. I have several retirement accounts—some are pensions and some are IRAs. Does it matter which retirement account I use?
A. Yes. QCDs to a qualified charity can only be made from an IRA. Under certain circumstances, however, you may be able to roll assets from a pension, profit sharing, 401(k) or 403(b) plan into an IRA and then make the donation.
Q. I have two charities I want to support. Can I give $100,000 from my IRA to each?
A. No. Under the law, you can give a maximum of $100,000. You can split the $100,000 among multiple charities. Any amount of more than $100,000 in one year must be reported as taxable income.
Q. My spouse and I would like to give more than $100,000. How can we do that?
A. If your spouse is 701⁄2 or older and has an IRA, he or she can also give up to $100,000 from his or her IRA.
Please consult with your tax and finance professionals if you are contemplating a charitable gift.