To be eligible to make a QCD, the following criteria must be met:
The account types that are eligible for QCDs include:
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.
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.
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If you have more questions about if a QCD is right for you, please contact your tax advisor.