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?
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.
Email your questions to .
This story was originally published on Oct. 13, 2020.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.