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.