How to Use Your Retirement Assets for Good

Using Your Retirement Assets for Good: Qualified Charitable Distributions

Many investors are unaware that you can use retirement assets to support the charities of your choice while avoiding taxes at the same time.

A qualified charitable distribution (QCD) is a direct transfer of money from an individual retirement account (IRA) to an eligible charitable organization.

Unlike regular withdrawals from your IRA, QCDs are excluded from taxable income. And unlike other charitable contributions, you don’t need to itemize them when filing your tax return. The 2017 tax law changes made it harder for many to use charitable giving as part of their tax strategy—the higher standard deduction means you need a higher dollar value in itemized deductions (charitable gifts among them) for an itemized return to offer any tax savings. If you are able to make them, the tax treatment of QCDs lets you enjoy the higher standard deduction while using the QCD to carry out your charitable giving.

Before making a QCD it’s important to understand the rules and restrictions:

  1. Your Age. You must be at least 70½-years-old to make a qualified charitable distribution. Also, a QCD lowers the tax hit on your mandatory annual cash-out from an IRA after age 70½. (Pending legislation may hike the required minimum distribution (RMD) age limit to 72-years-old; we’ll keep you posted.)
  2. Direct Transfer. When making a QCD, the money needs to go directly from your IRA to your chosen, qualified charity. This can happen electronically, by mail or your IRA custodian can send a check payable to the charity to you so that you can personally deliver the donation.
  3. Charity Eligibility. The charity must be approved by the IRS for you to get the tax benefit. Approved charities include 501(c)(3) organizations and houses of worship. Note: Donor-advised funds are not eligible to receive QCDs. The IRS provides a searchable database here.
  4. Distribution Limits. For 2019, the maximum amount an individual can count as a QCD is $100,000. If you are married and file a joint tax return, each spouse can donate $100,000 so long as they have individual IRA accounts to draw from. This limit can be reached by donating to as many charities as you wish.
  5. IRA Rules. QCD rules apply to traditional IRAs and inherited IRAs. Active SEP and SIMPLE IRAs do not qualify. While you can make a QCD from a Roth IRA, it doesn’t come with any tax advantages. (Distributions from a Roth are already tax-free.)

Keep in mind that tax laws are amended from time-to-time so the rules are subject to change. And we know it’s a lot to take in—we’re always happy to help you think it through. Please contact us at (800) 492-6868 if you have any questions about charitable giving.

As always, please visit www.adviserinvestments.com for our timely and ongoing investment commentary. In the meantime, all of us at Adviser Investments wish you a safe, sound and prosperous investment future.

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment managementfinancial and tax planningmanaged individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.


This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations or personal investment advice, or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

Companies mentioned in this article are not necessarily held in client portfolios and our references to them should not be seen as a recommendation to buy, sell or hold any of them.

© 2019 Adviser Investments, LLC. All Rights Reserved.