Qualified Charitable Distributions (QCDs): A Tax-Smart Way to Donate

A qualified charitable distribution (QCD) is a tax-free distribution from an IRA that is made directly to a qualified charity. QCDs can be a great way to support your favorite charities and reduce your tax bill at the same time.

To be eligible for a QCD, you must be at least 70½ years old and must have an IRA. You can make a QCD from any type of IRA, including traditional IRAs, Roth IRAs, and SIMPLE IRAs.

The amount of the QCD is limited to the amount of your required minimum distribution (RMD) for the year. If you do not have an RMD, you can still make a QCD, but the amount will be limited to your IRA balance.

To make a QCD, you must instruct your IRA trustee to send the distribution directly to the charity. You cannot take the distribution yourself and then donate it to the charity.

If you make a QCD, you will not have to include the distribution in your taxable income. This can be a significant tax break, especially if you are in a high tax bracket.

For example, let's say you are in the 22% tax bracket and you make a QCD of $10,000. This will save you $2,200 in taxes.

QCDs can also be a great way to meet your required minimum distributions. If you are not sure if you can afford to take a large RMD, you can make a QCD instead. This will reduce your RMD and help you avoid paying taxes on the distribution.

QCDs are a great way to support your favorite charities and reduce your tax bill. If you are at least 70½ years old and have an IRA, you should consider making a QCD.

Here are some things to keep in mind about QCDs:

If you have any questions about QCDs, be sure to contact us today.