KNOXVILLE, Tenn. — As the year comes to a close, many of you are probably looking at how to make better financial decisions going into 2023. There is a way some of you can work towards that goal while also giving back to the community during the holiday season.
It is called a qualified charitable distribution, more commonly known as a QCD. A QCD allows you to take an individual retirement account (IRA) and distribute funds off of that account to benefit a 501(c)(3) nonprofit.
This can come with some pretty neat tax benefits for you.
When you pull that money out of your IRA, it does not get counted as taxable income, so when you are doing your taxes it is a great strategy to try to reduce your taxable obligation.
Chris Lambert with the Trust Company of Tennessee explained a QCD could be applied toward what is called a required minimum distribution, or the amount of money that must be withdrawn from an IRA.
"So it is a great time to sit down with your financial advisor and your tax advisor, get together and identify certain organizations that are maybe important to you and also talk about some of the areas that are important to you with your tax situation also," Lambert said.
He also recommends engaging the charity of your choosing.
"Let them know that you are planning to make that gift and it is a good strategy to determine if it is a good way to do this for that organization instead of paying throughout the year out of your checking account or discretionary income like that," Lambert said. "A qualified charitable distribution is a great way to make a larger gift throughout the year and it also comes with those tax benefits."