Using your individual retirement account (IRA) to initiate a qualified charitable distribution (QCD for short; also known as an IRA charitable rollover) can be a game-changer for many donors who are 70 1/2 years young or up.
As we explained in a February JCF Blog post about QCDs, you can avoid paying taxes on the IRA payout, and, for those who are aged 72 or up, the transaction can count towards your required minimum distribution (RMD), all the while you get to give tzedakah to a cause that is important to you.
This form of charitable giving by donors has exploded in popularity in recent years, and perhaps it may work well for you, too. You can even contribute a QCD to your endowment fund held by the JCF, and ensure that your legacy continues for many generations. (Sidebar: don't forget to update your IRA's beneficiary designations to include a legacy gift!)
If you choose to initiate a QCD to grow your endowment fund held by the Jewish Community Foundation, Inc., here are the key steps you can follow:
1. Do Your Due Diligence: The JCF encourages you to first talk with your trusted financial or tax advisor to determine if this tactic may fit well in your plans.
2. Connect with the JCF: By letting us know that you plan to initiate a QCD into your endowment fund with the JCF, we can help you ensure that it is processed correctly. It is important to note that, at times, an IRA provider may not indicate in their payout to the JCF who the contribution is from or what it is intended for. Contact the JCF at 856-673-2560 or infojcf@jfedsnj.org to alert us to your plans.
3. Initiate the Transaction with your IRA Provider: When you're ready to start the QCD, you will need to submit a request with the provider that administers your IRA. Each provider uses its own form. For your convenience, below is a list of commonly-used IRA providers, with each link directing you to their customized distribution form.
[Notes: The above links will take you to websites that are unaffiliated with the JCF. The QCD forms are current as of August 3, 2022, and can change at any time. The JCF does not endorse any IRA provider, this list is for information only. Consult with your IRA provider as needed before completing and submitting your QCD request. If the provider you use is not included in this list, check their website directly or search "(firm name) IRA QCD form" and you may find a link to the right page.]
Lastly, two important procedural notes to keep in mind:
First, if you're looking to offset your RMD by initiating a QCD, you will want to initiate the QCD before taking income for the year from your IRA. There is a "first money out" rule, whereby dollars taken out first are considered to be your RMD.
And second, just to reiterate, you do not want to take the distribution as income and then make a charitable donation to the JCF (or other nonprofit) via cash. Instead, it needs to be a payout to the JCF/other nonprofit directly from your IRA in order to earn the tax benefits.
To wrap up, before getting out your checkbook to make a donation, please consider utilizing a QCD from your IRA as a potentially highly beneficial donation opportunity, if the circumstances are right for you.
Thank you and happy donating!