Qualified Charitable Distribution

If you are in the wonderful phase of life called retirement (!) you probably have an Individual Retirement Account (IRA). At age 72, you will need to either take RMDs (required minimum distributions) from your plan annually or face considerable tax penalties. These RMDs become taxable income subject to whatever marginal rates your tax situation implies.

For people in this situation, a QCD (qualified charitable distribution) becomes a very attractive opportunity for philanthropy. If you designate part of your RMD to donate to a qualified charity, it no longer counts as your taxable income.  It is very simple to do, and reduces the tax you will owe Uncle Sam, and may actually move you into a lower tax bracket overall (further saving your costs of Medicare, capital gains, etc).

This is a new development from the tax law changes of 2018 that many people remain unaware of. Regardless of what group may be a beneficiary of your generosity, we’d urge you to find out about QCDs from your own tax advisor.