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Can You Still Do a Qualified Charitable Distribution in 2020?

Can you still do the Qualified Charitable Distribution in 2020? This is a question we received from a listener. We’ll tell you what a QCD is, who qualifies, how you do it, and offer a few tips.

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qualified charitable distribution 2020

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Can you still do a Qualified Charitable Distribution in 2020?

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Today we have a question from Charlie. He asks, “I saw where we don’t have to take our required minimum distributions this year. Can we still do the charitable distribution from our IRA?”

The CARES Act suspended the need for required minimum distributions in 2020. But what Charlie is referring to is the qualified charitable distribution. This allows people who are at least 70½ to send a distribution from their IRA directly to a charity. There is a benefit to this, you don’t have to report it as income.

Tax benefits of a Qualified Charitable Distribution

Today, the standard deduction is much higher. Most people aren’t able to itemize their deductions. This means many people lost the tax benefits from charitable donations.

By not having to report them as income, you do get the tax benefit. And the benefit is even better. You don’t pay federal or state income taxes on the qualified charitable distributions. Itemized deductions don’t help you on your state income taxes.

How do you make a Qualified Charitable Distribution?

Here is what you need to know about Qualified Charitable Distributions:

  1. You have to be at least age 70½.
  2. Because the funds are not going to the account owner, most custodians are going to require a signed form. You’ll need the name and address of the charity.
  3. The custodian will then send the funds directly to the charity.

This distribution is going to show up on your 1099R as a normal distribution. You need to tell your tax preparer that this is a qualified charitable distribution. They will be able to handle it properly for your return.

Something to consider...

Even though you aren’t required to take money from your IRA this year, you can still do the qualified charitable distribution. But, keep something in mind. We are close enough to the end of the year to consider waiting until January to complete this. It will count towards your 2021 required minimum distribution. We’re not trying to discourage you from supporting those organizations now. But, if you wait a couple months, it will give you the biggest bang for your buck.

A tip for 2021 (and beyond)

Let’s say you go to church every week and you put $20 in the collection basket. Use the qualified charitable distribution and send them $1,000 from your IRA, instead. The church gets the same amount and you’ll get the tax benefits you didn’t receive before. If you have questions about how this could help you, talk to a financial advisor.
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qualified charitable distribution 2020

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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