A Qualified Charitable Distribution allows individuals aged 70½ or older to donate up to $100,000 directly from their traditional IRA to a qualified charity without incurring taxable income.
Unlike a standard charitable donation, a QCD doesn't require the donor to itemize deductions. The distribution is excluded from the donor's gross income, which can be particularly beneficial for those:
- Who do not itemize deductions
- Who are close to income thresholds that affect Medicare premiums or taxability of Social Security benefits
- Who are subject to Required Minimum Distributions (RMDs) starting at age 73
Planning Tip: Married couples can each make a QCD up to $100,000 annually from their respective IRAs, allowing for up to $200,000 in tax-free charitable contributions per year.
Why QCDs Matter for Nonprofits
QCDs present a win-win scenario for both donors and nonprofits:
- Tax Advantage for Donors: The distribution avoids income tax, even for those who don't itemize.
- Larger Gifts for Nonprofits: Many retirees are more willing to give generously when they can do so in a tax-efficient way.
- Reliable Support: Since QCDs can count toward RMDs, they may become an integral part of a donor's annual financial routine, providing your nonprofit with a dependable source of funding.
Yet, many eligible donors are still unaware of this opportunity or how easy it is to make a QCD. This is where your organization can step in to educate and engage.
Action Steps for Nonprofits
- Educate Your Donors
Incorporate QCD information in donor newsletters, year-end giving guides, and direct appeals, especially to those aged 70+. - Simplify the Process
Provide sample QCD letters or instructions that donors can share with their IRA custodians to initiate a transfer. - Acknowledge Correctly
While QCDs don't require a formal donation receipt for tax purposes, sending a clear acknowledgment helps build relationships and encourages repeat giving. - Highlight Real Impact
Share stories or statistics showing how QCD gifts have advanced your mission. This adds transparency and encourages others to participate.
Keep the Momentum Going
As the population ages and more Americans enter retirement, QCDs will continue to grow in importance. By making it easy for your donors to understand and execute this giving strategy, your nonprofit can benefit from a more stable and generous stream of support, while offering donors a smart and satisfying way to give.
Need help crafting donor communications around QCDs or strategizing ways to engage IRA-age supporters? Our team can help.
