As we get closer to year end, I am getting a lot of questions about giving to charities for tax reasons. This topic is near and dear to me for many reasons, but the main reason is that there are several ways to give and many people aren't aware of the benefits of strategies outside of giving cash. Here is one.
Qualified Charitable Distribution:
A qualified charitable distribution (QCD), often referred to as a "charitable IRA rollover," is a direct transfer by an individual over age 70½ from an IRA to a qualified charity [IRC §408(d)(8)]. The charity must be a public charity or private foundation that can receive general contributions (not a donor-advised fund or a §509(a) supporting organization). The QCD must otherwise have qualified as a charitable income tax deduction [IRC §408(d)(8)(B)(i)].
A person can direct up to $105,000 per year in this manner (annual aggregate amount for 2024), but contributions made after age 70½ for which an income tax deduction was taken count against QCD amounts. The distributed amount is excluded from income (shouldn’t effect social security or Medicare taxation!), so the taxpayer does not need to report the distribution as taxable income for federal tax purposes. Furthermore, the distribution counts toward the taxpayer's annual required minimum distribution if one is due. However, the distribution does not qualify for a charitable deduction [IRC §408(d)(8)(E)].
The QCD was originally enacted as part of the Pension Protection Act of 2006 as a temporary measure. It was revived under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and finally made permanent under the Protecting Americans From Tax Hikes Act of 2015.