What is a Qualified Charitable Distribution (QCD)?

The IRS requires clients age 73 or older to take required minimum distributions (RMDs) from their Individual Retirement Accounts (IRAs) each year or be subject to a 25 percent excise tax penalty.

RMDs increase your client’s adjusted gross income (AGI) and could push your client into a higher tax bracket, negatively impacting Social Security, Medicare benefits and other tax credits and deductions.

To offset RMD income taxes and increase cash donations for charity, taxpayers over age 70 ½ can donate up to $100,000 directly from a taxable IRA to a 501(c)(3) charity instead of taking that amount as RMD income.

This donation is known as a QCD.

Illustration Cash Gift QCD Gift
Adjusted Gross Income (AGI) $140,485

(Includes RMD)
Donation to Qualified Charity $40,485 $40,485
Itemized or Standard Deduction $40,485

Itemized Deduction

(Assumes gift is only itemized deduction)

Standard Deduction

(Assumes 2021 standard deduction amounts of $12,550 plus $1,700 for age 65 or older)
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)

(Excludes other federal and state income taxes)
Estimated Tax Savings $3,353

Gifting QCDs

Although QCDs cannot be gifted to donor-advised funds, they can be gifted to designated funds and field-of-interest funds held at San Diego Foundation. Additionally, we offer donors an opportunity to make a QCD that supports their charitable interests through one of our strategic initiatives:

Your QCD Partner

At SDF, we guide you and your clients through the QCD giving process in four easy steps:

  1. Choosing a gift amount
  2. Choosing which community need or cause aligns best with your client’s giving interest(s)
  3. Working with your client’s plan administrator to complete the IRA Letter of Intent and IRA Distribution Request forms
  4. Making the gift by check, wire transfer or security to a qualified SDF initiative.

Interested in learning more about QCDs? Contact us today.

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Jason Rogers

Jason Rogers, AIF, CWS
Director, Wealth Advisor Relations
(858) 245-1508