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Qualified charitable distributions from an IRA
An IRA owner who has reached age 70 and a half can send money directly from the IRA to a charity, and the amount is left out of taxable income entirely.
Who this exists for. This exists for an IRA owner age 70 and a half or older who gives to charity. Ticks that show it: I give to charity; I have an IRA or an old workplace plan; I am 70 or older; I am 73 or older.
How it works
The transfer must go straight from the IRA custodian to a qualified public charity, not through the owner's hands, and the owner must be at least 70 and a half on the day of the transfer. Up to this year's official qcd annual limit (not yet verified here; see the official source below) a year per person can be sent this way, and the figure is indexed. The amount never enters adjusted gross income, so it does not raise Medicare premiums, tax on Social Security benefits, or any phase out that keys on income. For an owner subject to required minimum distributions, the transfer counts toward the required amount for the year. No charitable deduction is taken for it, since the income was never counted. Donor advised funds and private foundations do not qualify as recipients. The custodian reports the distribution and the owner marks it on the return.
What it gives
The gift leaves taxable income entirely, which beats a deduction for anyone who does not itemize.
It counts toward the year's required minimum distribution.
Keeping the amount out of adjusted gross income can hold down Medicare premium surcharges and tax on benefits.
What it costs, or where the catch is
The check must go directly from the custodian, and a withdrawal that passes through the owner's account is just a taxable distribution.
Donor advised funds cannot receive it.
Deductible IRA contributions made after 70 and a half reduce the amount that can be excluded.
A worked example
Otto is 74, takes the standard deduction, and has a required minimum distribution of $18,000 this year. He directs his custodian to send $6,000 straight to the animal shelter and takes the other $12,000 himself. Only $12,000 is taxable income, since $18,000 minus $6,000 is $12,000, and at his 22 percent rate the exclusion saves him $1,320, while a check from his bank account would have saved nothing because he does not itemize.
Where it goes wrong
The common miss is taking the full distribution into a bank account first and then writing the check to charity, which forfeits the exclusion.
Who confirms it for you
For your own numbers, a CPA or enrolled agent. This page explains how the rule works for people in general; it does not know your situation and does not tell you what to do.
The official source
IRS Publication 590-B, Distributions from Individual Retirement Arrangements. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.
Ask about Qualified charitable distributions from an IRA
A model reads this page and answers from it. It will say when the answer is not on the page. Education, not personalized advice.
Nearby doors
- Leaving a job: the four things that can happen to the old plan
This applies when a worker leaves an employer and has a balance in that employer's retirement plan.
- The traditional IRA and the deduction phase out
This exists for anyone with earned income who opens an IRA on their own, and especially for a worker who also has a plan at work, since that changes whether the contribution is deductible.
- IRA catch up at 50
This applies when a person who contributes to a traditional or Roth IRA turns 50 during the year, which adds a catch up amount to the yearly cap.
- Roth conversions and the low income year
This exists for a person with pretax money in a traditional IRA or old workplace plan, and it matters most in a year when income is unusually low.
- The two Roth five year rules
This applies when a person holds a Roth IRA and takes money out, since two separate five year clocks decide whether earnings and converted amounts come out free of tax and penalty.
- The early withdrawal penalty and its exceptions
This applies when a person under 59 and a half takes money out of an IRA, since the withdrawal is taxed and usually carries a 10 percent addition unless one of the listed exceptions fits.
Education, not advice. Wealthy Habitat explains how rules work and never recommends what to do with your money. The No Advice Disclosure.