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IRA Qualified Charitable Distributions (QCDs)

Background
The Pension Protection Act of 2006 created the Qualified Charitable Distribution (QCD), allowing owners aged 70½ or older of traditional and Roth IRAs the ability to distribute directly to certain public charities (including SUNY Potsdam) up to $100,000 per year without the distribution being included as taxable income, but allowing it to count towards the annual required minimum distribution (RMD). The Protecting Americans from Tax Hikes Act of 2015 (PATH) extended and made permanent qualified charitable distributions.

Qualified Charitable Distributions are sometimes referred to as “IRA Charitable Rollovers.”

Note: Since PATH extended and made permanent previous law, QCDs are not allowed to fund gift-with-income plans such as gift annuities and charitable trusts.

IRA Qualified Charitable Distribution Qualifications
Based on the Pension Protection Act of 2006:

  • The IRA owner must be at least 70½ years old at the time a distribution is made to charity
  • The distribution must be made from the IRA directly to a qualified charity
  • The combined value of all distributions made (to one or more charities) cannot exceed $100,000 per taxpayer per taxable year
  • Transfers are not included in adjusted gross income for federal income tax purposes
  • Transfers to charity may count as part of your annual mandatory IRA withdrawal amount
  • IRA transfers to charity are not taken into account in determining the deduction eligibility of other charitable contributions

The IRS issued these clarifications in 2007:

  • QCDs may satisfy pledges
  • A person over age 70½ who is the beneficiary of an inherited IRA may make charitable transfers from that IRA
  • Charitable transfers may be made from a SEP or a SIMPLE IRA if no employer contributions were made to the IRA in the year of the transfer
  • A qualified charitable distribution is not subject to withholding of income taxes
  • The maximum total qualified charitable distribution amount each year is $100,000 per person, not per household, or per IRA account.
  • The IRA administrator may issue a check payable to the charity and present it to the donor to deliver to the charity. The gift date is the date the donor mails the check via the USPS or hand-delivers it to the charity
  • Distributions cannot be made from 401(k) plans, but it appears allowable under certain circumstances to move a portion of the 401(k) into a Rollover IRA and then make a qualified charitable distribution from there

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019

The SECURE Act updated certain legislation to raise the age to begin taking required minimum distributions from 70½ to 72. Qualified charitable distributions were created by different, separate legislation, so the minimum age to begin making QCDs remains at 70½.

Cautions

  • The distribution must be made from your IRA directly to charity, otherwise you must declare the distribution as income
  • The IRA must be a traditional IRA or a Roth IRA; it cannot be an employer-sponsored plan such as a SIMPLE IRA, a 401(k) or 403(b) plan or a simplified employment pension (SEP) plan
  • Distributions from Roth IRAs are not taxed to the account owner, so it is still wise to determine if some asset other than the Roth IRA is best to give to charity
  • Distributions are not deductible as charitable gifts
  • You may receive no benefit from the charity for your QCD (e.g. tickets, dinners, etc.)
  • Distributions cannot be made to gift annuities, charitable trusts or pooled life income funds
  • Distributions cannot be made to donor-advised funds, private foundations or “supporting organizations”
  • The donor is responsible for and must obtain documentation for the distribution as he/she would substantiate any gift to charity
  • In some states (check with your advisor), QCDs may be includable in income for state and local tax purposes and may not earn an offsetting charitable deduction, depending on state and local law
  • In some states (check with your advisor), IRA withdrawals up to a certain amount may not be includable for state income tax purposes, thus negating some benefit of a QCD at the state level.

Who might use this opportunity?

  • If the majority of your assets are in IRAs, it may be easier to make a direct transfer rather than reporting a withdrawal on your tax return
  • If you do not itemize, you may be able to make IRA gifts without increasing (and maybe even decrease) your adjusted gross income
  • If you already give up to 60% of your adjusted gross income, this legislation may allow you to, in effect, exceed that limit
  • If you have accrued a “carryover” of charitable deductions from past tax years, this legislation may allow you to make gifts without impacting those carryover amounts
  • If your level of income phases-out certain deductions, a QCD may allow you to make gifts without increasing (and maybe even decrease) your adjusted gross income
  • It may simply be easier to make a QCD from your IRA to charity and not need to worry about the income tax implications
  • If you’ve been thinking about making a larger gift, this may provide a tax-advantaged time-frame for doing it
  • In some states (check with your advisor), a charitable deduction is not allowed for state tax purposes.  A QCD that does not increase your reportable income may result in savings on state taxes as well

QCD gifts are eligible to fulfill gift pledges and to count in SUNY Potsdam fundraising campaigns, in anniversary reunion fundraising and towards annual President’s Club recognition. View sample letter request a QCD from your IRA administrator

Most QCDs go to SUNY Potsdam as a check from the IRA administrator.  Oftentimes these checks do not identify the donor or the fact that it is a QCD.  It is helpful if you contact SUNY Potsdam when you authorize your gift. View sample letter to send to Potsdam.

Everyone’s financial position is unique, so it is important to consult your tax counsel and plan administrator before making gifts from your IRA.

Contact us for help with questions:
Jason Ladouceur, Senior Director of  College Advancement
Potsdam College Foundation
44 Pierrepont Ave., Potsdam, NY 13676
(315) 267-2190
giftplan@potsdam.edu

The Raymond Legacy Society celebrates those who have made an estate gift arrangement to support the College, as well as those who have established a permanent endowed fund. The Society also provides educational material on giving to assist alumni and friends in achieving their philanthropic goals. For more information, visit potsdam.edu/legacy.

This information does not provide legal or financial advice, nor is it a comprehensive review of the topic.  You should consult your attorney, tax advisor and SUNY Potsdam before making or planning your gift. (rev. 01/20)