A QCD is a direct transfer of funds from your Individual Retirement Account (IRA), payable directly to a qualified charity, such as Columbia University. Amounts distributed as a QCD can be counted toward satisfying your Required Minimum Distribution (RMD) for the year, up to $100,000 per individual. Any amount distributed to a charity as a QCD is excluded from your taxable income.

To be eligible to make a QCD, the following criteria must be met:

• You must be age 70 ½ or older;
• Your retirement account must be a traditional IRA; and
• The distribution must be made by your RMD deadline, which is generally December 31 each year

The maximum annual distribution amount that can qualify for a QCD is $100,000. This limit would apply to the sum of QCDs made to one or more charities in a calendar year. If you are a joint tax filer, both you and your spouse can make a $100,000 QCD from your own traditional IRAs.

A QCD can satisfy all or part of your required minimum distribution (RMD) that starts at age 72 for traditional IRAs (or age 73 if you turned 72 after Dec. 31, 2022.). The money distributed as a QCD does not count toward your adjusted gross income (AGI) as it does with a regular distribution.

You do not receive a tax deduction for a QCD; rather it reduces your taxable income and therefore can provide tax benefits even if you do not itemize.

The account types that are eligible for QCDs include:

• Traditional and inherited IRAs;
• Simplified Employee Pension (SEP) IRAs (inactive plan only); and
• Savings Incentive Match Plan for Employees (SIMPLE) IRAs
• (inactive plan only).

Under certain circumstances, QCDs may be made from a Roth IRA. However, Roth IRAs are not subject to RMDs during your lifetime, and distributions are generally tax-free. Consult a tax advisor to determine if making a QCD from a Roth is appropriate for your situation. Non-IRA qualified retirement plans such as an employer offered 401(k), 403(b), etc. are not eligible. However, it may be possible to transfer or rollover funds from a non-IRA qualified retirement plan to an IRA. Check with your retirement plan administrator for eligibility and guidelines Once the new IRA is established, you may then initiate an IRA QCD.

Non-IRA qualified retirement plans such as an employer offered 401(k), 403(b), etc. are not eligible. However, it may be possible to transfer or rollover funds from a non-IRA qualified retirement plan to an IRA. Check with your retirement plan administrator for eligibility and guidelines. Once the new IRA is established, you may then initiate an IRA QCD.

A QCD may not be made to a Donor Advised Fund, supporting organization, or private foundation. A QCD must be an outright gift and you may not receive any tangible benefits in exchange for the gift.

A QCD is reported by your IRA custodian as a normal distribution on IRS Form 1099-R for any non-inherited IRAs. To report a QCD on your Form 1040 tax return, you generally report the full amount of the charitable distribution on the line for IRA distributions. On the line for the taxable amount, enter zero if the full amount was a qualified charitable distribution. Enter “QCD” next to this line. You should keep the acknowledgment of the donation for your tax records. Check with your tax advisor to confirm your personal tax reporting requirements.

If you take a distribution from your IRA that is payable to yourself, and then use those fund to make a gift to charity later, this will not count as a QCD. Instead, the distribution from your IRA to your account will be considered taxable ordinary income, and your subsequent gift to charity may be deductible. Taking additional taxable income through your RMD may result in being taxed in a higher tax bracket, and may also reduce your eligibility for certain tax credits and deductions. For example, your taxable income helps determine the amount of your Social Security benefits that are subject to taxes. Keeping your taxable income level lower may also help reduce your potential exposure to the Medicare surtax.

If you plan to give to charity, you may wish to consider making a QCD to eliminate or reduce the impact of RMD income.

The SECURE Act of 2019 increased the age at which IRA account holders must begin taking RMDs from age 70 ½ to 72. However, the age at which an individual may begin making QCDs did not change and remains at 70 ½. For individuals who may not need the additional income and are concerned about the impact of their future RMDs on their adjusted gross income, QCDs may reduce the future size of their RMDs after they reach age 72.

You can make as many QCDs as you like up to a cumulative amount of $100,000 per year. Check with your plan administrator as they may have a minimum distribution amount or maximum number of distributions allowed.

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If you have more questions about supporting Columbia University, please contact us at gift.planning@columbia.edu. We would be happy to help!

If you have more questions about if a QCD is right for you, please contact your tax advisor.