For many retired persons, giving to charities (501 (c) (3) organizations), such as churches, by using an annual IRA distribution is one of the few true “win-win” situations in personal finance. If you have been filing your annual income tax returns and the use of the standard deduction was calculated (instead of itemized deductions); then there is a much better giving option called a Qualified Charitable Distribution (QCD). The requirements are:

1. You had your 70th Birthday before July 1st, 2019 or you turned 72 years of age on or after January 1st, 2022.
2. Your retirement plan is a Traditional, Rollover or Inherited IRA (Individual Retirement Account) OR a SEP (inactive plans only) or SIMPLE (inactive plans only.)

If you meet these criteria, you are required by the IRS to withdraw some of your money each year. This is called an RMD (Required Minimum Distribution.) The financial institution holding your retirement funds will send you a notice. Please note that the IRS does not have an RMD requirement in 2020 due to the pandemic. In 2021, only the persons born before July 1st, 1949 will have an RMD requirement.  

Other important things to note:

1. The (normally taxable) retirement funds given to charity via an RMD will not be taxable and will result in paying less taxes and receiving a larger tax refund.
2. The QCD must be set up together by you and the financial institution holding your retirement funds. The checks cannot be made payable to you. 
3. Usually only one QCD check is written to each charity per year. No more than a total of six QCD checks typically are written each year to all charities combined.  QCD checks are usually larger dollar amounts.
4. Pensions and most ROTH IRA plans do not qualify for QCD’s.
5. The total amount of QCD checks written for any one year cannot exceed $100,000.
6. QCD checks cannot be written after December 31st for the year of the donation.

If you have any questions, please consult the institution holding your retirement funds or your tax advisor. Thank you.