Qualified charitable distributions

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 (QCDs) allow individuals to donate to charity as a tax-free IRA distribution.

QCDs can be included as part of a Required Minimum Distribution.

There are several restrictions:


 * The maximum deductible contribution limit is $100,000
 * Distributions must be made directly to the charitable organization
 * The IRA owner must be 70 1/2 or over

QCDs must come from an individual IRA or a Roth IRA. An SEP or SIMPLE IRA also qualify if there are no active contributions.

If you file a joint return, your spouse can also have a QCD and exclude up to $100,000. The amount of the QCD is limited to the amount of the distribution that would otherwise be included in income. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of otherwise taxable income.

Guidance
A comprehensive "How to" guide can be found on the Michael Kitces blog. See: Rules To Do An IRA Qualified Charitable Distribution

Video
Morningstar has published a video interview which provides easy-to-understand explanations and examples.

The interview clarifies an an important point regarding eligibility of the deduction. If the charity provides anything in return for the donation, the deduction is not allowed. Search the transcript for "$10 tote bag".

Benefits of a QCD

 * Allows those who use the standard deduction to realize a tax advantage from a charitable contribution.

Required Minimum Distributions (RMDs) and additional distributions from an IRA are part of your taxable income. QCD's do not count as taxable income, so you can lower your taxable income by the amount of your QCD - thereby lowering your taxes. This is beneficial if you use the standard deduction instead of itemizing.


 * Allows those at or near the earnings limit for higher medicare premiums to lower their taxable income.