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What is a Qualified Charitable Distribution?

A Qualified Charitable Distribution (QCD) can help your clients offset their Required Minimum Distribution (RMD) income tax burden and increase their charitable giving.

The IRS requires clients age 72 or older (it was age 70½ prior to January 1, 2020) who hold Individual Retirement Accounts (IRAs) to take RMDs each year – even if they don’t want or need the funds.

RMD income increases your client’s adjusted gross income (AGI) and could push your client into a higher tax bracket, negatively impacting Social Security and Medicare benefits and other tax credits and deductions. A 50 percent excise tax is the penalty for not taking an RMD.

Taxpayers over age 70 ½ can donate up to $100,000 directly from a taxable IRA to a qualified 501(c)(3) charity instead of taking that amount as RMD income. This donation is known as a QCD.

QCDs are not subject to federal income tax, maximizing your client’s tax savings and cash donations for charity.

Cash Gift QCD Gift
Quinn’s Adjusted Gross Income – Including vs. Excluding $40,485 RMD

  • Cash Gift scenario includes $100,000 plus $40,485 RMD income
  • QCD Gift scenarios excludes $40,485 from income
$140,485 $100,000
Charitable Donation Amount to Qualified Charity $40,485 $40,485
Itemized or Standard Deduction for Income Taxes

  • Cash Gift scenario assumes gift is only itemized deduction
  • QCD Gift scenarios assumes 2021 standard deduction amounts: $12,550 plus $1,700 for age 65 or older
$40,485

Itemized Deduction

$14,250

Standard Deduction

Estimated Federal Taxable Income $100,000 $85,750
Estimated Federal Income Taxes Owed

  • Based on 2021 tax rate/brackets and standard deduction
  • Excludes other federal and state income taxes
$17,835 $14,482
Estimated Tax Savings $3,353

Gifting QCDs

Although QCDs cannot be gifted to donor-advised funds, San Diego Foundation offers donors an opportunity to make a QCD that supports their charitable interests, through one of our strategic program funds:

Your QCD Partner

At San Diego Foundation, we can help you guide your clients through the QCD giving process. Gifting a QCD with San Diego Foundation takes four easy steps:

  1. Your client chooses his/her gift amount
  2. Your client chooses which community need or cause aligns best with their giving interests
  3. You or your client’s plan administrator completes the IRA Letter of Intent and IRA Distribution Request forms
  4. Make the gift by check or wire transfer.

Interested in learning more about QCDs? Contact us today.

Jason Rogers

Jason Rogers, AIF, CWS
Director, Wealth Advisor Relations
jrogers@sdfoundation.org
(858) 245-1508