Guest Author Joseph J. Lezotte, CFP®, AIF®: Is a qualified charitable distribution right for you?

If you’re a charitably-minded individual at an age that requires you to take a required minimum distribution from your IRA and you don’t need the full amount to support you, a qualified charitable distribution (QCD) may be a good option.

Generally, a qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity.

Qualified charitable distributions can satisfy all or part the amount of your required minimum distribution from your IRA. For example, if your 2016 required minimum distribution was $10,000, and you made a $5,000 qualified charitable distribution for 2016, you would only have had to withdraw another $5,000 to satisfy your 2016 required minimum distribution.

Charitable distributions are reported on Form 1099-R for the calendar year the distribution is made. To report a qualified charitable distribution on your Form 1040 tax return, you generally report the full amount of the charitable distribution on the line for IRA distributions. You must also file Form 8606, Nondeductible IRAs, if:

  • You made the qualified charitable distribution from a traditional IRA in which you had basis and received a distribution from the IRA during the same year, other than the qualified charitable distribution; or
  • The qualified charitable distribution was made from a Roth IRA.

If you’re interested in taking advantage of this opportunity or if you are already, make sure to talk with both your ShindelRock CPA and your financial advisor. Your CPA may not know about your qualified charitable distributions due to the lack of IRS reporting on Forms 1099-R. Your financial advisor can work directly with your CPA to set up these payments seamlessly and ensure the distributions qualify for the proper type of tax treatment.

Joseph J. Lezotte, CFP®, AIF® is President and Founder of River Oaks Wealth Advisors focusing on assisting clients with meeting their financial and retirement objectives utilizing a customized approach. Fee based investment advisory services offered through SPC, a registered investment advisor. Securities offered through Sigma Financial Corporation. Member FINRA/SIPC. River Oaks Wealth Advisors is independent of Sigma Financial Corporation and SPC. This is for informational purposes only and should not be construed as tax advice. Consult your tax advisor regarding your specific situation.