If you're 70½ or older with money sitting in a traditional IRA, there's a move that can shrink your tax bill while helping a cause you care about.
It's called a qualified charitable distribution, or QCD.
And for retirees who don't need every dollar from their required minimum distributions, it's one of the few tax breaks that still works in your favor.
Once you hit 70½, you can direct up to $105,000 per year (the 2024 limit, adjusted annually for inflation) straight from your IRA to a qualified charity.
The money goes directly from the account to the charity.
That matters, because money you never touch doesn't show up as taxable income.
Because once you turn 73, the IRS makes you take required minimum distributions from most retirement accounts whether you need the cash or not.
They can push you into a higher tax bracket, raise your Medicare premiums, and make more of your Social Security taxable.
A QCD can satisfy part or all of that RMD without adding a dime to your taxable income.
The mechanics are simple, but the details trip people up.
You must be at least 70½ on the day the gift is made.
The transfer has to go directly from your IRA custodian to the charity.
If you withdraw the money first and write a check yourself, it doesn't count.
You also can't use a QCD for a donor-advised fund or a private foundation.
It needs to go to a qualified public charity.
One more catch: you won't get a charitable deduction for a QCD.
The benefit comes from keeping the money out of your income in the first place, which is often worth more than a deduction, especially if you take the standard deduction.
This matters most for retirees who are charitably inclined but don't itemize.
Under the current standard deduction, many older Americans get no tax benefit at all from writing checks to charity.
You give the same amount, but the IRS treats it as if the withdrawal never happened.
The transfer must be completed by December 31 to count for that tax year.
Custodians can take weeks to process requests, especially in December when everyone remembers this rule at once.
If you're planning a year-end gift, start the paperwork in November.
Each spouse can direct up to the annual limit from their own IRA, doubling the household total.
And if you've already taken some RMDs this year, you can still use a QCD for the rest, as long as the total stays within the limit.
The bottom line: if you're over 70½, give to charity, and have a traditional IRA, this is one of the cleanest tax moves available.
It won't make headlines, but it can quietly keep thousands of dollars out of the IRS's hands.
My take: too many retirees write charity checks from their checking account and lose the tax benefit entirely.
A five-minute call to your IRA custodian could change that.
Final Thoughts
Do it before the December rush, not during it.