Busey Bank | The Basics of Qualified Charitable Distributions

Qualified Charitable Distributions—often referred to as QCDs—are a direct transfer of funds from your Individual Retirement Account (IRA) custodian to a qualified charity. QCDs can be applied towards satisfying your required minimum distributions (RMDs) for the year if certain rules are met.

In addition to the benefits of giving to a charity, a QCD excludes the amount donated from your taxable income.

The first step will be determining how much you want to gift to charity. There will likely be a separate form for your acknowledgement of the requirements for the QCD, as well as the name and mailing address of the organization.

Can I Make a QCD?

To qualify as a QCD, certain requirements must be met, including eligible accounts:

• Traditional IRA
• Rollover IRA
• Inherited IRA
• SEP IRA (inactive plans only)
• Simple IRA (inactive plans only)
• Roth IRA’s (under certain, specific circumstances)

In addition, there are established rules and regulations, including:

• You must be aged 70½ or older—even if the beneficiary of an inherited IRA.
• QCDs are limited to the amount that would otherwise be taxed as ordinary income (this excludes non-deductible contributions).
• The maximum annual amount is $100,000 (for tax year 2023). If you file a joint tax return, your spouse can also make a QCD from their IRA up to $100,000.
• For a QCD to count toward your current year’s Required Minimum Distribution (RMD) the funds must be distributed from your IRA by the RMD deadline (generally December 31).
• Funds distributed directly to you as the IRA owner and then to charity do not qualify as a QCD. The funds must go directly from your IRA to the qualified charity.

What Kinds of Charities Qualify?

The charity must be a 501(c)(3) organization, eligible to receive tax-deductible contributions. Donor advised funds, supporting organizations and private foundations do not qualify for QCDs.

Beginning in 2023, you can make a one-time contribution of up to $50,000 to fund a Charitable Remainder Trust, Charitable Annuity or a Charitable Remainder Unitrust. These are used in very specific situations so you should consult with your attorney and tax advisor before considering.

Tax Reporting

A QCD is reported as a normal distribution on IRS Form 1099-R for any non-inherited IRA. For inherited IRAs, this is reported as a death distribution. A QCD is not included in your taxable income, and you do not have to itemize your tax deductions to take advantage of this. Make sure you receive the same type of acknowledgement that the donation was made that you would need to claim a deduction for a typical charitable contribution.

If you have enough to provide for your financial future and want to start or continue your charitable gifting, a QCD can be a smart way to meet your RMD, gift to the charities that are important to you and help lower your federal income taxes.

Busey Wealth Management’s experienced team of financial professionals is here to help you with customized solutions. To learn more about our comprehensive services or to find an advisor near you, visit busey.com/wealth-management.

This is not intended to provide legal, tax or accounting advice. Any statement contained in this communication concerning U.S. tax matters is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties imposed on the relevant taxpayer. Clients should obtain their own independent tax advice based on their particular circumstances.

This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities.

This presentation is for general information purposes only. It does not take into account the particular investment objectives, restrictions, tax and financial situation or other needs of any specific client.

Investment products and services through Busey Wealth Management are:
Not FDIC INSURED | May lose value | No bank guarantee