Charitable Gifting:
Additional Strategy for Taxpayers over age 70 ½ 

The IRS requires minimum distributions (“RMD”) be taken from IRA’s each year after an individual turns age 70 ½.  You can satisfy some or all of your RMD by making a Qualified Charitable Distribution (“QCD”) directly from an eligible IRA (i.e. Traditional, Rollover, Inherited, Inherited Roth [under certain circumstances] and inactive SEP and SIMPLE plans) to qualified charities.  For example, if your RMD is $40,000.00, you could make a QCD to your charities of choice for up to $40,000.00 and realize several tax benefits. 

First, the entire amount of your charitable donation will be excluded from gross income.  Second, this exclusion could result in less of your social security benefits being subject to federal income taxes and have a positive impact on the amount you are paying in Medicare premiums because your gross income will be less due to you having made the QCD.  Finally, this strategy makes sense in cases where your Schedule A deductions, other than charitable contributions (i.e. medical expenses, state & local taxes, and mortgage interest), will not meet the standard deduction by themselves.  In this case, you will not receive a benefit from the entire charitable contribution if claimed on your Schedule A.  As such, it might be advisable to make a QCD during tax years where this situation arises.

The following rules and limitations apply to QCDs:
  • Any QCD to a qualified charity would not be included in your charitable contributions for the purposes of itemizing deductions as reflected on your Schedule A; 
  • In order for a donation to qualify as a QCD, the distribution must transfer directly from the IRA custodian to the charitable organization.  There cannot be any intervening possession or ownership of the distribution by you, but you should still receive, and provide us with, an acknowledgement of any such donation; 
  • The maximum amount that can qualify for a QCD in any given tax year is $100,000.00 per person.  If filing a joint tax return, each spouse can make a QCD of $100,000.00 (maximum of $200,000.00), provided that the QCD is directed from their respective IRA’s; 
  • The QCD must be distributed from your IRA by your RMD deadline (generally December 31st, except in the year you turn age 70 ½) for it to apply towards your current year’s RMD;
  • Any QCD above your RMD will not satisfy RMDs for future tax years;
  • QCD's must be made from IRA QCD’s must be made from IRA accounts and cannot be made from 401k accounts; 
  • The charitable distribution must be made to an organization that qualifies as a charitable organization under Section 170(b)(1)(A) of the tax code; and
  • Donor advised funds and private foundations do not qualify for QCDs.

If you are interested in making a QCD, you will need to contact your IRA custodian.