Qualified Charitable Distributions (QCDs)
Key Points
For those who are 70-1/2 years old
Minimize taxable income by making charitable contributions directly from your traditional IRA
May reduce Required Minimum Distributions
Funds must go directly from investment account to charitable (501(c)(3)) organization
Taxpayer must receive and keep acknowledgement from charitable organization
QCDs must be taken during the tax year (not in Jan-April of the following year)
Q: Does the QCD have to come from my RMD?
A: No, you may make up to $105,000 ($210,000 for a married couple) in tax free donations, even if your RMD is less or you are not yet taking RMDs.
Q: Is a QCD better than a charitable tax deduction on my tax return?
A: Since the 2017 Tax Cuts and Jobs Act, many taxpayers do not have deductions high enough to benefit from charitable deductions on Schedule A. The QCD ensures full tax deductibility.
Q: What are other benefits of a QCD?
A: If you are taking RMDs, the QCD may be used to avoid higher tax brackets, prevent phase out of other deductions, reduce taxation on Social Security benefits, optimizing tax results.
Consult with your tax advisor for specifics applying to your tax circumstances.