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Qualified Charitable Distribution from an IRA

Congress has provided that people can make a “Qualified Charitable Distribution” from their traditional IRA using their minimum required distribution directly to a 501(c)(3). This is a win-win. You satisfy the requirement to withdraw the minimum required distribution, but the money withdrawn is not taxable if donated directly to a 501(c)(3) charity.

A Qualified Charitable Distribution can be counted toward satisfying your minimum required distribution for the year as long as certain rules are met. The rules for making a Qualified Charitable Distribution with your minimum required distribution are as follows:

  1. You must be 70 ½ or older to be eligible to make a Qualified Charitable Distribution.
  2. Qualified Charitable Distributions are limited to the amount that would otherwise be taxed as ordinary income.
  3. The maximum annual amount that can qualify for a Qualified Charitable Distribution is $100,000.
  4. For a Qualified Charitable Distribution to count towards your current year’s Mandatory Required Distribution, the funds must come directly out of your traditional IRA by your Mandatory Required Distribution deadline, generally December 31.
  5. Any amount donated from your IRA above your Mandatory Required Distribution does not count toward satisfying a future year’s Mandatory Required Distribution.
  6. Funds distributed from your traditional IRA directly to you, the IRA owner, and which you then give to charity do not qualify as a Qualified Charitable Distribution.
  7. The charity must be a 501(c)(3) organization, eligible to receive tax-deductible contributions.

When making a Qualified Charitable Distribution, the Museum will send you a letter acknowledging the donation. Almost all the mutual funds have a special form to direct your Mandatory Required Distribution be paid directly to the 501(c)(3) charity of your choice. For example, Fidelity instructs their shareholders to make the Mandatory Required Distribution check payable to the name of the charity. Fidelity sends the check to the account holder, who then mails the check directly to the charity. In this way the charity will send the acknowledgment letter back to the donor This article is not meant to provide legal or tax advice. A tax advisor can help you determine if both your IRA and your charity qualify for the contribution of your mandatory required distribution to a qualified charitable distribution for a tax deduction

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