Boost Your Clients’ Tax Savings With a Gift From Their IRA

If you have clients who own a traditional or inherited IRA and do not rely on the income from those accounts, a Qualified Charitable Distribution is an excellent opportunity to maximize their tax savings while supporting their favorite charities.

What is a Qualified Charitable Distribution (QCD)?

This savvy planning technique allows your clients to make tax-free distributions from their IRA directly to charity once they reach the age of 70 ½. In 2024, these distributions can be up to $105,000 per person – or up to $210,000 for married couples. Gifts of IRA assets are especially advantageous for older adults who can’t itemize their charitable gifts under the current tax law. These transfers also count toward any required minimum distributions your clients may have for the year.

Tax advantages for your clients’ beneficiaries:

New regulations on inherited IRAs mean your clients’ beneficiaries may face a hefty tax burden, as IRAs and qualified retirement plans may be subject to federal and state income tax as well as estate taxes, which can greatly reduce their value. For example, when a beneficiary receives a qualified retirement plan after a loved one’s death and cashes it out, this could place him or her in a higher tax bracket. The amount received will be considered taxable income, and the beneficiary may be required to pay a higher percentage of taxes. If the decedent was over age 59-1/2 at the time of death, the IRA will be subject to PA inheritance tax*.

To qualify for a QCD:

• Donor must be age 70 ½ or older as of the date of the distribution.
• The IRA must be a Traditional IRA (including an Inherited IRA) or an inactive SEP or Simple IRA.
• Funds must be distributed directly to a 501(c)(3) charity like The Foundation for Delaware County.
• Only public charities qualify as eligible recipients of a QCD. Gifts to private foundations, donor-advised funds and supporting organizations do not qualify for QCD treatment; however, gifts to designated and field-of-interest funds at the Foundation are eligible.

How to make a QCD:

1. Donors cannot deposit their distribution and then write a check to charity – it must be made directly from the trustee of the IRA to the charitable organization.
2. QCDs can support any public charity, including The Foundation for Delaware County.
3. Though QCDs cannot support donor-advised funds, they can support or create other charitable funds at the Foundation including:

• Designated Funds
• Scholarship Funds
• Field of Interest Funds

Year-End Giving Deadline Approaching

We recommend initiating IRA distributions by Monday, Dec. 15, to ensure your clients’ gifts count toward the 2024 tax year.

*Generally, when a spouse is the designated beneficiary of a traditional IRA, that spouse has the option to roll over the inherited IRA into the surviving spouse’s own IRA and thus able to defer payment of income tax until that spouse is age 70 1/2 then over that spouse’s lifetime as the inherited IRA proceeds are withdrawn.

Contact us today to learn how we can support you and your philanthropic clients. We’re always available for questions or to schedule a personal consultation – all at no cost.

Contact Monika Collins at mcollins@delcofoundation.org; 610-744-1015