If you’re stepping into retirement, you might be asking yourself, “What’s next?”
Many donors we meet at the Community Foundation already have their answer. They’re pivoting from their working years to their giving years. Some might establish a donor-advised fund. Others dedicate more time to volunteering. Those who are at least 70 ½ years old have another option, as they may choose to use their individual retirement account (IRA) to make a qualified charitable distribution (QCD).
A QCD is a non-taxable distribution from your IRA to charitable organizations. Directing your IRA distribution to a charitable organization through a QCD can minimize your tax liability. If you are 72 or older, a QCD can count toward your required minimum distribution (RMD) for the year.
Annual IRA QCD Limit Increased in 2024
The annual limit on qualified charitable distributions increased to $105,000 for 2024. Historically, this limit was set at $100,000, but will adjust for inflation going forward.
While the IRS has strict limits on QCDs, the Community Foundation is here to help if you want to make a QCD to a charitable fund.
Set Up a Designated Fund to Support One Charity
If you plan to support one specific charity with your QCD and you wish to stagger your donation to the charity over time, you can create a designated fund to receive the distribution. Setting up a designated fund to receive the distribution gives you the freedom to donate to the charity on your timeline.
Establish a Scholarship Fund to Support Students
If you want to support education with your QCD, you can establish a scholarship fund to receive the distribution. While you set the award criteria and may serve on a selection committee to choose the scholarship recipients, the Community Foundation promotes the scholarship opportunity, accepts applications, verifies students’ eligibility and processes scholarship payments.
Assets held in designated funds and scholarship funds are invested, and the growth is tax-free. You choose how your fund is invested, whether in the Community Foundation’s investment pools or with your financial advisor.
Donor-advised funds are not eligible for QCDs, but donations to donor-advised funds are tax deductible, and you can name a donor-advised fund as a charitable beneficiary of an IRA. We suggest working with your financial advisor or tax consultant to determine the best option for your situation.
To set up a designated fund or a scholarship fund, reach out to us at info@growyourgiving.org or 816.842.0944.
Authored by: Corey Ziegler, Chief Legal Counsel