There is good news for donors 70 ½ or older. The “Qualified Charitable Distribution (QCD), sometimes called the “IRA Charitable Rollover,” can provide you the same tax benefit as an itemized deduction for those who no longer itemize because QCD gifts are not included in your income. Here are the requirements for a QCD gift: 

  • You must be 70 ½ or older at the time of the gift. 
  • Gifts must go directly from your IRA to Community Foundation for Monterey County. 
  • The total of all your QCD gifts for 2024 cannot exceed $105,000 per person however, your spouse with a separate IRA can make a QCD of up to $105,000 in 2024 if they otherwise qualify.
  • You can not take an income tax charitable deduction for your gift. 

If you are 70½ or older, there are tax-smart reasons to make a QCD. If you are taking the standard deduction and no longer itemizing your income tax charitable deductions, the QCD could be right for you. A QCD gift to charity is not included in your taxable income. The tax impact is as if you made a fully deductible gift to charity without increasing your income. 

If you are age 72 or older making a gift counts toward your RMD, and it is not included in your taxable income. Using your RMD as a charitable contribution will exclude that amount from your adjusted-gross income (AGI) for the year, which means that in addition to reducing your income taxes, it also can decrease the amount of Social Security that is subject to tax and potentially lower your Medicare premiums. In addition to saving taxes, you will be making an immediate impact on the lives of those who need Community Foundation for Monterey County the most.

Charitable Rollover Gift Annuity — Under a new law effective in 2023, some donors can make a QCD in exchange for a charitable gift annuity. There are some rules and limitations:

  • You can exercise this option only once during your lifetime.
  • There is an aggregate limit of $53,000 for 2024.
  • The entire payment you receive from your charitable gift annuity will be subject to income tax.
  • You can include your spouse as a recipient of the annuity payment.
  • There is no income tax deduction for this contribution, although there is no tax on the QCD either.

Example

Consider Alan, a 75 year old who would like to make a special contribution to support Community Foundation for Monterey County. Alan has substantial assets in his IRA, and he knows that he is facing a RMD this year. Even though he doesn’t really need the income, Alan knows that his RMD is going to increase his income tax. Instead, Alan chooses to make a $53,000 QCD to Community Foundation for Monterey County in exchange for a charitable gift annuity which will pay him $3,710 (7%) per year for the rest of his lifetime. Alan understands that he is allowed to make this election only one time, but he is looking forward to securing a stream of payments for his lifetime while reducing his RMD and making a generous contribution to Community Foundation for Monterey County.

Your IRA administrator can help you make a Qualified Charitable Distribution from your IRA. Many administrators require you to use their QCD distribution form and comply with other requirements. Follow your financial institution’s forms and procedures to ensure you receive the tax benefits of a QCD.