If you're 70½ or older with money in a traditional IRA, there's a move that lets you send cash to charity and skip the income tax on it entirely.
It's called a qualified charitable distribution, or QCD, and it's been in the tax code since 2006.
Yet most eligible retirees have never used it, and a lot of them don't know it exists.
Your IRA custodian transfers money directly to a qualified charity.
The amount counts toward your required minimum distribution but never shows up as taxable income.
In 2024, you can move up to $105,000 per person.
A married couple with separate IRAs can each do that, which means $210,000 total.
Because the standard deduction jumped in 2018 and most retirees no longer itemize.
If you don't itemize, your charitable gifts don't lower your taxes at all.
The QCD route bypasses that problem completely, because it works above the line.
There's a second benefit that gets less attention.
Keeping the distribution out of your adjusted gross income can reduce how much of your Social Security is taxed.
It can also lower your Medicare Part B and Part D premiums, which are tied to income thresholds.
For someone near a bracket cliff, moving $20,000 to charity through a QCD instead of writing a check could save far more than the donation itself.
The catch is that the money has to go straight from the IRA to the charity.
If you take a distribution and then write a personal check, it doesn't count.
This trips up a surprising number of people, including some who've done it wrong for years without realizing.
You also need to confirm the charity qualifies.
Most 501(c)(3) organizations work, but donor-advised funds and private foundations generally don't.
And you can't use a QCD to fund a charitable gift annuity.
Check with the organization before you authorize the transfer.
The transfer has to be completed by December 31.
Custodians get swamped in December, so paperwork submitted on the 28th may not clear.
If you're planning a year-end gift, start the process in November.
One more wrinkle: starting in 2024, the annual limit is indexed for inflation.
It was $100,000 for years and is now $105,000.
That number will keep creeping up, which makes the strategy more useful over time, not less.
So who benefits from you not knowing this?
Mostly the mutual fund companies and custodians who'd rather keep assets under management than see them leave.
And the tax-prep industry, which gets paid to sort out the mess afterward.
There's no lobby pushing hard to explain QCDs to retirees, because nobody makes much money explaining them.
The upshot: if you're charitably inclined, over 70½, and holding a traditional IRA, this is worth a 20-minute call to your custodian.
It's a rule that's been sitting there for nearly two decades while most people ignore it. **The takeaway:** A QCD won't make you rich and it isn't right for everyone, especially if you're in a low bracket or don't give to charity.
But if you're already writing checks to your church or alma mater, routing that money through your IRA is one of the few unambiguously smart tax moves left for retirees.
Final Thoughts
The only real cost is the effort of picking up the phone.