If you are age 72 (it was age 70.5 prior to January 1, 2020) or older, you may be required to take RMDs from your retirement accounts (Traditional IRAs, 401Ks, 403Bs, etc.). The amount of your RMD each year depends on your age and the value in your accounts at the end of the prior year. RMDs are a way for the government to collect income taxes on these tax-deferred accounts.

For charitably-minded retirees with retirement accounts, there is a tax-relief strategy available: the Qualified Charitable Distribution (QCD). The QCD gifting option allows you, starting at age 70.5 or 72 (depending on when you are required to start your RMDs), to instruct your IRA administrator to direct IRA distributions—up to $100,000 per year—to a qualified 501(c)(3) charity. Because the IRA income goes directly to charity, you do not report the QCD as taxable income and do not owe any taxes on the QCD, which may be particularly beneficial to you if you are forced to take RMDs and don’t need the extra money. In addition to avoiding taxable income, your IRA distribution can be put to good use by your favorite qualified charity. BCAM plans to use any QCDs received for the specific purpose of continuing to promote our organization around the state of Michigan. BCAM adopted its mission in 1990: As a united body, BCAM exists to represent and serve basketball coaches for the betterment of our great game. QCDs will allow us to continue to support that cause!

If you regularly support charities, you may find that the QCD gift option provides you with greater tax savings than cash donations. Why? Reducing your Adjusted Gross Income (AGI) generally provides a greater tax benefit than claiming a tax deduction because AGI is used in several calculations, such as determining the taxable portion of your Social Security benefits or what deductions and credits you qualify for receiving. A QCD allows you to receive a tax benefit from your charitable contribution even if you do not itemize your deductions, because the QCD is excluded from your taxable income.

Remember that a QCD must go directly from your retirement account to the qualified 501(c)(3) charity (in other words, you cannot take your RMD in cash then write a check back to the charity). Most retirement plan providers have forms to process QCDs. BCAM is a qualified 501(c)(3) charity able to accept QCDs.

As always, it is best to consult with your financial advisor to talk through you and your family’s specific situation. Feel free to reach out to BCAM Treasurer, Todd Sander, to discuss more specifics if you are considering a QCD.