About
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Careers
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Contact
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Services Industries Knowledge Center People

About Our Services

We offer tailored solutions — whether private company or owner; public or private fund, adviser or fund service provider; or Fortune 1000 enterprise. Learn how we can help you.

Learn More

Assurance Services

Employee Benefit Plan Audits Internal Controls Investment Company Audits Private Company Audits SOC Readiness & Compliance

Tax Services

Federal Tax Planning & Compliance High Net Worth & Wealth Transfer International Filings & Structuring Investment Company Tax State & Local Tax Tax Credits & Incentives Transaction Tax Planning

Advisory Services

Business Valuations Data & Insights Digital Finance Solutions IT Strategy & Implementation M&A Advisory Outsourced Accounting Solutions Risk Assurance & Advisory Transaction Services Turnaround & Restructuring

Our Industry Expertise

Our industry experience means you can find professionals who speak your language and bring earned insights to the table. Learn how we can help you.

Learn More

Key Industries

Digital Assets Investment Companies Manufacturing Private Companies Private Equity Real Estate & Construction Technology & Life Science
VIEW THE COMPLETE LIST

Knowledge Center

Our team wants to help your team stay up to date. Browse our thought leadership, events and news for insights and a point of view on business-critical topics.

Learn More

Insights

Browse valuable articles and publications our experts have written to help you and your organization answer key questions — and consider new ones.

Read Our Insights

Events

Join us in person and online for events that address timely topics and key business considerations.

Explore Our Events

News

Find out what is happening at Cohen & Company, from industry recognitions and growth updates, to where we are contributing to important media stories.

Read Our News
People
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Back to Insights

The Who, What & Why of IRA Qualified Charitable Distributions

December 06, 2016 Federal Tax Planning & Compliance

As we find ourselves in the full swing of year-end tax planning, the following information originally posted in March of this year is worth repeating, particularly to help certain taxpayers meet their philanthropic goals and reduce their tax liability.

Under the Protecting Americans from Tax Hikes (PATH) Act passed in late 2015, the rule allowing for tax-free, qualified charitable distributions (QCD) of up to $100,000 annually from an Individual Retirement Account (IRA) was retroactively reinstated to January 1, 2015, and made permanent.

What Qualifies for QCD Treatment?

For an IRA distribution to qualify as a QCD, two criteria must be met:

  1. The IRA owner must have attained age 70 ½ prior to the distribution, and
  2. The distribution must be made directly from the IRA custodian to the charitable organization.

Taxpayers must not take possession of the funds personally, it must go directly to the charity either via a trustee to trustee transfer or check written directly from the IRA to the charity. Donor-advised funds and private foundations are ineligible to receive QCDs.

What Is the Tax Benefit of a QCD? (Why Should I Bother?)

QCDs of up to $100,000 are excluded from a taxpayer’s income and can be used to satisfy a taxpayer’s required minimum distribution. While the income is excluded from the taxpayer’s return, the taxpayer will not receive a charitable deduction for the transfer to charity.

Instead of performing a charitable distribution of assets, suppose a taxpayer took a taxable IRA distribution then contributed that amount to charity. The taxpayer would report taxable income in the amount of the IRA distribution then a charitable deduction for the contribution. The extent to which the charitable deduction will offset the taxable IRA income will depend upon a taxpayer’s individual facts and circumstances, including their adjusted gross income (AGI), their states’ tax laws and whether they were subject to the alternative minimum tax (AMT).

Taxpayers with high AGI and few other itemized deductions may be subject to significant phaseouts of their itemized deductions for federal purposes. In those cases, a QCD may provide a meaningful federal income tax benefit. Additionally, taxpayers living in a state such as Ohio, which does not allow for charitable deductions at the state tax level, may achieve a state tax benefit from the QCD strategy.

Who Should Consider a QCD?

Philanthropically minded taxpayers aged 70 ½ or older who have IRA assets not needed to support their lifestyle may benefit from a charitable distribution of IRA assets. The QCD can help taxpayers meet their philanthropic goals and reduce their tax liability.

Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.

Sign Up for Our Emails & Events

Receive insights from our specialists in a variety of areas and timely information on upcoming events directly to your inbox as they go live in our online Knowledge Center.

Subscribe Today
Subscribe to our newsletter
About Contact Submit RFP Privacy Policy
LinkedIn Twitter Facebook
© 2023 Cohen & Company