If you are age 70½ or older, you may be able to exclude a qualified charitable distribution (QCD) of up to $100,000 from your income each year. A QCD is a taxable distribution paid directly from an IRA (other than an ongoing SEP or SIMPLE IRA) to a qualified charity. It cannot be paid to you as the IRA owner.
To take advantage of this tax reducing strategy, you must be at least age 70½ when the QCD distribution to the charity is made. The SECURE 2.0 Act of 2022 did not change the 70½ age to be eligible to make a QCD.
A few features that make a QCD attractive are:
- A QCD does not affect your income and is tax-free if paid directly from the IRA to an eligible charitable organization.
- A QCD is available whether you itemize deductions or take the standard deduction.
- A QCD may also count toward your required minimum distribution for the year.
- Because a QCD does not count toward income, a QCD does not affect eligibility for certain tax credits that are based on income.
If you would like more information about whether a QCD is a good option for you given your situation, please contact our office. We would be happy to talk things over.
This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.