A qualified charitable distribution is a transfer of funds from an IRA directly to a charitable organization. QCD’s give taxpayers who are 70 ½ years old (or older) the opportunity to donate to charities from their IRA. If a taxpayer is 73 or older, the QCD can count towards their required minimum distribution (RMDs).
Usually, when a taxpayer takes a distribution from an IRA it is taxed, however, when the distributions are paid directly to a charity, they become tax-free. It is important to note that to qualify as a QCD, these distributions need to be paid from an IRA directly to an eligible charity. A distribution made directly to the IRA Owner and then issued to the charity does not qualify as a QCD.
A qualified charitable distribution is an option whether a taxpayer itemizes deductions or not. The amounts transferred from your IRA to a charity are not taxable nor are they treated as a charitable contribution to itemize deductions.
Another item to note is that QCDs are not added back to your Modified Adjusted Gross Income (MAGI) for Medicare purposes. Meaning, QCDs can help reduce your MAGI and help avoid the Medicare Income-Related Monthly Adjustment Amount (IRMAA).
Do I qualify to make a QCD?
- You must be 70 ½ or older
- To count as a QCD, the funds must be come out by December 31st.
- The charity must be a 501(c)(3) organization who is able to receive tax-deductible contributions.
- You must have a traditional IRA, Inherited IRA, Inactive SEP or SIMPLE plans
In 2024, taxpayers are able to donate up to $105,000 from an IRA (married couples can donate up to $210,000).