IRA: Charitable Donations from IRAs

Overview: 

The Protecting Americans from Tax Hikes Acts of 2015 (PATH) was approved by Congress December 16, 2015 made Qualified Charitable Distributions (QCD) a permanent option to fulfill Required Minimum Distribution requirements.  

[Note: We recommend that you consult a qualified tax advisor or refer to the U.S. Internal Revenue Service before proceeding with a distribution.]

IRA owners 70½ or older may request an IRA distribution direct to a “qualified charity,”  by as much as $100,000 of IRA assets per year.  The following FAQs provide basic answers.

 

Charitable Distributions

What is a Qualified Charitable Distribution (QCD)?

What is a "qualified charity?"

Where can an IRA owner find additional information on QCDs?

Withdrawal Processing

When can I submit my withdrawal?

Can IB customers submit a QCD withdrawal online?

What amount may be withdrawn? Why?

Where are the funds disbursed?

Does the distribution count towards the Required Minimum Distribution (RMD) amount?

Eligible IRA Accounts

Is the Charitable Distribution allowed from all IRAs held at IB?

Are the QCDs allowed from other IRA and retirement plans not held at IB?

QCD Tax Reporting

How is the QCD reported to the IRS?

Can any taxes be withheld from the distribution?

Do federal taxes have to be paid on the distribution?

Does a state or municipal tax have to be paid on the distribution?

 

 

Charitable Distributions

What is a Qualified Charitable Distribution (QCD)?
A distribution from an eligible IRA to an eligible charitable organization from an individual 70 ½ or older.

How to determine if a charity can receive the QCD?
The IRS Exempt Organizations Select Check allows users to "Search for Charities" among a list of organizations eligible to receive tax-deductible charitable contributions.

Where can an IRA owner find additional information on QCDs? Visit Charitable Donations for IRAs for additional information on qualified charitable distributions. See also IRS Publication 590-b.

 

Withdrawal Processing

When can I submit my withdrawal?
The deadline to submit QCD withdrawals from your IB account is December 22, 2017.  Although you can take a 2017 IRA distribution anytime before the year's withdrawal cut-off date,  you must allow enough time for trade settlement and withdrawal processing.
 
As third-party withdrawals are subject to special handling and the review period varies depending on the nature of the withdrawal request, please allow sufficient time for processing.  
 

Can IB customers submit a QCD withdrawal online?
Yes.  Requests are processed manually with your completion of a paper distribution form.  Print the IRA Charitable Distribution Form and upload the form to the Account Management Menu's secure Message Center for processing.

For security purposes, the withdrawal request should be initiated by the IRA owner through the secure Message Center located within the Account Management menu.   Click the header Support and Message Center to access the Message Center. 

You may submit and track the request directly with Client Services using an inquiry ticket.

What amount may be withdrawn? Why?
IB will process the withdrawal for any amount, as long as the account has sufficient available funds. Why? Although the QCD donations to the charity must not exceed $100,000 per year to retain QCD status, charitable gifts may exceed this limit.

Where are the funds disbursed?a
Funds are made payable to the IRS qualified charity and mailed direct to the charity. Only funds disbursed to the charity can be designated from your IRA as a QCD. 

Does the distribution count towards the Required Minimum Distribution (RMD) amount?
Yes

 

Eligible IRA Accounts

Is the Charitable Distribution allowed from all IRAs held at IB?
No, see the list below.  IRA owners should contact a qualified tax advisor about how to preserve QCD tax benefits. Not all distributions are created equal. A tax advisor will be able to assess an IRA owner’s best choice.

Traditional IRA > YES
Rollover IRA > YES
Roth IRA > YES
Inherited IRA > YES, if the beneficiary is at least age 70 1/2
SEP IRA > NO
Education IRA > NO

Are the Charitable Distributions allowed from other IRA and retirement plans not held at IB?
No, not directly.  Retirement plans, employer sponsored SEP IRAs, and Simple IRAs (account classifications not held at IB) are not eligible for a QCD election. IRA owners may be eligible to rollover assets from these plans into a traditional, rollover, or Roth IRA to request a charitable distribution.  IRA owners should contact a qualified tax advisor or their retirement plan administrator.


QCD Tax Reporting

How is the QCD reported to the IRS?
IB will report the charitable distributions on Form 1099-R when issued. See Reports and Dates for 1099 availability dates.

  Can any taxes be withheld from the distribution?
No.

Do federal taxes have to be paid on the distribution?
Generally, federal taxes are not paid with QCDs. But distributions in excess of the IRS limit may be subject to income tax.  IB recommends that customers contact a qualified tax advisor.

Does a state or municipal tax have to be paid on the distribution?
Contact your tax advisor or local tax authority on state and municipal requirements for the distributed amount.

 

Disclaimer:  IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax advisor or refer to the U.S. Internal Revenue Service.