Charitable IRAs and RMDs

One way to make a taxwise gift is to use retirement assets through charitable beneficiary designations for all or part of different kinds of retirement accounts. Generally, a Qualified Charitable Distribution (QCD) is an otherwise taxable distribution from an IRA owned by an individual who is age 72 (previously was age 70 ½) or over that is paid directly from the IRA to a qualified charity. Source:  

Making a gift using the Charitable IRA Distribution can be strategic if:

  • You don’t need the extra income
  • Your Required Minimum Distribution (RMDs) cause more of your Social Security income to be taxed and may increase your Medicare premium and other surtaxes
  • You wish to lower your adjusted gross income by allocating all or part of your total RMDs (up to the individual limit per year) directly to your chosen charitable interests
  • You are making charitable contributions at your deduction limit, but want to give more
  • You don’t itemize deductions but still want to take advantage of taxwise giving

Your qualified charitable distributions can satisfy all or part of the amount of your required minimum distribution from your IRA. 

There is no charitable tax deduction for an IRA charitable distribution gift. The transfer goes directly from the account to the charitable recipient. Since you don’t receive the funds, they are not included in your income so there is no income tax paid on the distribution which, for many people, is more favorable than receiving a charitable deduction. 

There are many more beneficial details and scenarios that your financial advisor can provide to demonstrate the power of a Charitable IRA Distribution.

Please seek counsel from your own legal, tax, or financial professionals in connection with gift and estate planning matters to determine if this is the best option for you, as there are many ways to take advantage of these IRS rules.