https://moisandfitzgerald.com/how-do-i-make-charitable-donations-from-my-401k/
How do I make charitable donations from my 401(k)?
Direct donations from a 401(k) to charity on a tax favored basis are not possible. However, direct donations to charities from IRAs, called Qualified Charitable Distributions, are permitted. There are a few requirements to make those donations completely tax-free, chief among them is you must be 70½ years old at the time of the donation.
If you want to make a QCD but do not have an IRA, you will first need to get money into an IRA. The most common methods are to transfer retirement accounts from a former employer to an IRA or, if allowed by your current plan, perform an in-service distribution and transfer some of your active 401(k) funds to an IRA account. Your plan’s Summary Plan Description will say if in-service distributions are permitted.
Once funds are in an IRA there are a few requirements to get the tax break:
- You can donate to as many charities as you like as often as you like up to a total of $100,000 per taxpayer, per year. With planning, a couple can donate up to $200,000 in a tax year.
- The checks must be made payable to the charities.
- The charities must be 501(c)3 public charities.
- You must be at least 70½ years old at the time of the donation.
- If you have made deductible contributions to the IRA since turning 70½, those contributions will cause the donations to be taxed until all of those post 70½ contributions have come out of the account.
Facilitating a QCD is fairly simple: request a distribution form from the provider holding your IRA. Most IRA providers will give you the option to have the check mailed to the charity or to you, so that you can present the check in a more personal manner. Remember, regardless of where the check is mailed, the check should be made payable to the charity, not to you.
Alternatively, many IRA providers will provide a checkbook on the IRA for QCD purposes. Just make sure the charity cashes the check before December 31, so the donation is properly included on the 1099-R the provider will issue.
