Clarifying the Timeline for Donations from an IRA


Let’s set the record straight as far as the timeline goes on a QCD coming from an IRA. That’s a qualified charitable distribution (sometimes called a charitable rollover), coming out of an individual retirement account. It’s a great way to transfer money directly from your IRA to a charity—and avoid an income tax liability on that payout.

Recent radio ads touted a change in the law governing these payments, saying that they can be made tax-free once you hit age 72. Wrong. As was past practice, you can still make a charitable payout at age 70 1/2.

The confusion (those ads have stopped) may have occurred because the law changed the age at which IRA owners must take mandatory minimum distributions. It used to be 70 1/2 but was lifted to 72.

Once you hit age 72 you have to take that required minimum distribution, or face a confiscatory penalty. And here’s where the QCD steps in, as it allows you to give the money instead to a qualifying charity and satisfy the distribution requirement.

Make sure the money goes directly to the charity, without first touching your bank account. Otherwise, it will be treated as a distribution. Even then, all is not lost, tax-wise, as you can still take a deduction for a donation as long as you itemize your taxes.

You May Also Like

Susan Hatten: Giving Her Time, Treasure, Talents

Writer: Steve Dinnen Susan Hatten has built a solid upward-reaching career path on two ...

Investing With an Eye Toward the Greater Good

Above: Noel Friedman, MSCI, right, addresses a crowd as Samantha Azzarello, J.P. Morgan, left ...

Analysts Cast Wary Eye on Key Iowa Stocks

BY STEVE DINNEN Virtually all of the major companies cited today have hold recommendations ...