The IRA Qualified Charitable Distribution

Valley of the Sun United Way invites our donors to consider new and strategic ways of giving, partnering with us as we work to end the cycle of poverty in our communities. The IRA Qualified Charitable Distribution may offer donors a unique opportunity to support our work, while receiving favorable tax treatment for their gift.

The information provided below is general in nature and should not be relied on as tax, legal, or financial planning advice. For specific advice, please consult your professional advisors.

In December 2015, Congress passed a law allowing donors to give up to $100,000 to charity directly from certain types of Individual Retirement Accounts (IRAs) without counting the distribution as taxable income. This Qualified Charitable Distribution or “QCD” is a distribution from an IRA that is paid by a direct transfer of funds from an IRA custodian to a qualified charity like Valley of the Sun United Way, excluding it from taxable income.

QCD’s may be counted toward satisfying a donor’s Required Minimum Distributions (RMDs) for the year, as long as certain requirements are met. While many types of IRAs are eligible for QCDs, there are strict requirements.

Can I make a Qualified Charitable Distribution?

***At the end of 2019, the Setting Every Community Up For Retirement Enhancement (SECURE) Act was passed and signed into law. Among other things, this law pushes back the age of Required Minimum Distributions (RMD’s) from 70.5 to 72. Taxpayers who turned 70.5 in 2019 will be subject to RMDs, but donors who turn 70.5 after January 1, 2020 won’t be subject to RMDs until they turn 72 (so 2021 at the earliest).

70.5 year olds are still eligible to make a Qualified Charitable Distribution (QCD). While the SECURE Act changed the minimum age for RMDs, it did not change the minimum age for QCDs.

The SECURE Act also eliminates the “Stretch” IRA, which previously allowed non-spouse inheritors of IRAs to take distributions over the course of their anticipated life expectancy. Now, IRA inheritors are required to take full distribution within 10 years, which could expose them to a much higher tax bill. To spare their families this tax headache, IRA holders may wish to pass on different assets to their loved ones and designate Valley of the Sun United Way as their IRA beneficiary.

QCDs are limited to the amount that would otherwise be taxed as ordinary income. This excludes non-deductible contributions.

• The funds must be directly transferred from your IRA custodian, payable to a qualified charity.
  
• The maximum annual amount that can qualify for a QCD is $100,000. This applies to the sum of QCDs made to one or more charities in a calendar year.
• For a QCD to count towards your current year's Required Minimum Distribution, the funds must come out of your IRA by your RMD deadline, generally December 31.
  

A Qualified Charitable Distribution can be a powerful philanthropic tool, enabling you to see your charitable legacy come to life. Our Major Gifts Team would be happy to meet with you and your professional advisors to discuss your specific situation, and whether a QCD may be right for you. As always, thank you for supporting Valley of the Sun United Way. For more information about the many ways you can support Valley of the Sun United Way through Major or Planned Giving, please contact Lisa Groves, JD, at lgroves@vsuw.org or (602) 631-4806.