Qualified charitable distributions (QCD) allow those who have reached the age of 70 ½ years old have the ability to donate up to $100,000 total to one or more charities from their IRA instead of taking the required minimum distributions. This allows donors, in some cases, to avoid being pushed into a higher tax bracket.
The first aspect of QCD’s is the required minimum distributions. When individuals hold an IRA they are required to take RMDs each year beginning at the age of 72, despite if they want the funds or not, which increases their total taxable income.
This allows for a unique opportunity with qualified charitable distributions. QCD’s prevent the increase of taxable income which allows for higher tax rates and phaseouts to be avoided. All an individual has to do is donate up to $100,000 to one or multiple charities. This also affords a tax break for those who can no longer deduct donations to charities because they are forced to take the standard deduction.
Another positive is the QCDs may reduce the required minimum distribution in the future. They are not counted toward the maximum amounts deductible for those that itemize their giving on taxes, so an individual can give more than the $100,000.
There may be other considerations, that should be observed, regarding QCD’s. This just one tax saving idea when it comes to charitable giving. Contact Journey Beyond Self and let us help maximize your giving objectives within the context of your overall financial situation.