If you are age 70 1/2 or more and are required to take an “RMD” (Required Minimum Distribution) from your IRA, are you taking advantage of the option of donating that distribution to your favorite charity? Many of us make charitable contributions during the year. If you have an IRA and are required to take a distribution because of your age, you can use a QCD (Qualified Charitable Distribution) and eliminate that income. This QCD option applies only to IRA and not any company plans. It also applies to inactive SEP and SIMPLE plans.
With a QCD, your Required Minimum distribution can go directly from your IRA to the charity. This direct transfer takes care of the RMD but it is not included in your taxable income for that year. There is no charitable deduction since you did not include it the income from the distribution. Excluding these amounts from income can reduce adjusted gross income (AGI) as well as taxable social security and any itemized deductions that may be limited by that AGI
This QCD option became a permanent part of the Tax Law in 2015. There can be no benefit back to you because of the giving. If you receive tickets or some small token of appreciation, it could disallow your benefit of the direct transfer so be careful when using this option. If you have questions or want to learn more on this topic, please call our office.