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Wondering if there is a way to help others during this coronavirus outbreak?  If you own an IRA, you may be able to use your retirement account to donate to a charity in need.

IRA owners can make charitable donations with their retirement account by using a qualified charitable distribution or QCD. QCDs are also referred to as IRA charitable rollovers. Using a QCD, IRA owners who are 70½ or older can directly transfer up to $100,000 of IRA assets every year to an eligible charity.

If you own an IRA and meet the requirements, QCDs allow you to support any organization that is eligible to receive tax-deductible contributions, such as Habitat for Humanity, The Salvation Army, St. Jude Children’s Research Hospital, American National Red Cross, United Way, and Feeding America. 

As the coronavirus pandemic evolves, QCDs may provide a means of supporting organizations that are near and dear to your heart while also potentially offering a tax break if they fulfill or partially fulfill your annual RMD.

Starting at the age of 72 (or age 70½ before 1/1/2020), individuals who own a Traditional, SEP, or SIMPLE IRA are required to remove a portion of assets from their IRAs each year as a distribution, and these required minimum distributions typically are taxed as ordinary income. But in many cases, when an IRA holder makes a QCD, that distribution is not included as taxable income, which may lower an individual's annual tax burden. However, if you are also continuing to make contributions past age 70½, please consult your tax advisor as new IRS rules may affect the portion of a QCD that is excludable from income.

IRA owners who choose to make a QCD must be sure they understand the rules and implications of these distributions:

• To make a QCD, you must be 70½ or older.
• You can donate up to $100,000 to one or more charities.
• Each spouse in a married couple can make a QCD up to $100,000.
• A QCD must be paid directly from the IRA to the charity. As an IRA owner, you must instruct your IRA custodian to transfer the funds directly from the IRA to the charity. If a check is made out to you, it may be considered a distribution, and you may face a taxable event.
• For a QCD to count as your RMD, it must be withdrawn from your IRA by the end of the year.
• To get appropriate credit for making your QCD, your distribution must be donated to a charitable organization that accepts tax-deductible contributions — a 501(c) exempt entity.
• Not all charities are eligible to receive QCDs. These include private foundations and donor-advised funds.
• You cannot personally benefit in any way from a qualified charitable distribution.
• If you donate to a charity using a QCD, the payment cannot also be deducted as a charitable contribution.
• Given the logistics and rules involved in making qualified charitable distributions, you should consult with a tax or financial advisor who can help you determine if making a QCD is in your best interest.

The IRS deadline to make a qualified charitable distribution with your PENSCO IRA this year is 12/31/2020. If you make a QCD with your PENSCO IRA, here are the steps you need to complete:

Fill out the following form: IRA Distribution Request Form. You can submit this form and letter of instruction to PENSCO in two ways:

1) You can upload the form online

OR

2) You can fax the form to 303.614.7096

If you have questions on qualified charitable distributions or RMDs, please email us at [email protected] While you are also welcome to call us at 800.962.4238, please know that we are experiencing longer-than-normal hold times as we respond to client needs.

We hope you and your loved ones remain safe, and our thoughts go out to all of those who are impacted by the coronavirus pandemic.

This Blog does not provide investment, tax, or legal advice nor does it evaluate, recommend or endorse any advisory firm or investment vehicle. Investments are not FDIC insured and are subject to risk, including the loss of principal.

Pacific Premier Trust (formerly PENSCO Trust Company) performs the duties of an independent custodian of assets for self-directed individual and business retirement accounts and does not provide investment advice, sell investments or offer any tax or legal advice. Clients or potential clients are advised to perform their own due diligence in choosing any investment opportunity as well as selecting any professional to assist them with an investment opportunity. Alternative investments are not FDIC insured and are subject to risk, including loss of principal. Pacific Premier Trust is not affiliated with any financial professional, investment, investment sponsor, or investment, tax or legal advisor.

NOT FDIC-INSURED | NO BANK GUARANTEE | MAY LOSE VALUE