13 Oct Is this tax-saving strategy for college savings legal?

Q. Can a Qualified Charitable Distribution (QCD) be used as a contribution to your grandchild’s 529 college account?
— Grandpa

A. That’s a very creative and hopeful question, but no.

A Qualified Charitable Distribution (QCD) is a tax break where a nontaxable distribution is made directly from the trustee of an IRA to an organization eligible to receive a tax-deductible contribution, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.

Only 501(c)(3) organizations are eligible to receive QCDs.

“As a result, contributing to your grandchild’s 529 would not qualify,” Maye said.

You can get more information from IRS Publication 590, which has further details about making non-taxable IRA distributions to qualified charities.

“As a planning point it should be noted that even though RMDs are not required in 2020, a QCD can still be made if all the other requirements are met,” he said.

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This story was originally published on Oct. 13, 2020.

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