​Qualified charitable distributions, what are they?

Qualified Charitable Distributions (QCDs) are a way for individuals who are age 70½ or older to donate directly from their IRA (Individual Retirement Account) to a qualified charity, potentially providing tax benefits.  

Key Points about QCDs:  

Age Requirement:  

You must be at least 70½ years old at the time of the distribution.  

Eligible Accounts:  

QCDs can be made from traditional IRAs and Roth IRAs.  

They do not apply to employer-sponsored plans like 401(k)s unless specifically permitted.  

Amount Limits:  

The maximum annual QCD amount is $100,000 per individual.  

If both spouses have IRAs, each can contribute up to $100,000.  

Direct to Charity:  

The distribution must be made directly from the IRA to a qualified charity.  

You cannot take a distribution first and then donate it yourself if you want the QCD treatment.  

Tax Benefits:  

QCDs count toward your Required Minimum Distribution (RMD) for the year.  

They are excluded from your taxable income, which can reduce your overall tax liability.  

This is especially beneficial if you do not itemize deductions or want to reduce taxable income to avoid certain surtaxes or phaseouts.  

Qualified Charities:  

The charity must be qualified and eligible to receive tax-deductible contributions.  

Most public charities, including churches, schools, and nonprofits, qualify.  

Advantages:  

Reduce taxable income.  

Satisfy RMD requirements without increasing taxable income.  

Support charitable causes directly.  

Important Considerations:  

To qualify, the distribution must be transferred directly from the IRA to the charity.  

Keep documentation of the donation for tax records.  

Consult with a tax advisor to understand how QCDs fit into your overall tax strategy.  

In summary: QCDs are a tax-efficient way for seniors to donate to charity directly from their IRA, satisfying RMD requirements while potentially lowering taxable income.