If you're 70½ or older and you've been writing checks to charity from your bank account, you may be leaving a tax break on the table.
A little-known IRS rule lets you send money straight from your individual retirement account to a qualified charity — and that transfer never counts as taxable income.
It's called a qualified charitable distribution, or QCD.
And for retirees who don't itemize deductions, it can do something a regular donation can't.
Once you hit 70½, you can direct up to $105,000 per year (the 2024 limit) from your IRA directly to an eligible charity.
The money goes straight from your account to the organization.
You never touch it, so it never shows up as income on your tax return.
A normal withdrawal from a traditional IRA is taxed as ordinary income, and it can push you into a higher bracket.
It can also raise your Medicare Part B and Part D premiums through income-related surcharges.
A QCD sidesteps both problems because the distribution is excluded from your taxable income entirely.
The appeal is biggest for retirees who take the standard deduction.
Since the 2017 tax law roughly doubled the standard deduction, many older Americans no longer itemize, which means their charitable gifts no longer lower their tax bill at all.
A QCD restores some of that benefit, because you're reducing your taxable income rather than claiming a deduction.
There's a bonus for people 73 and older who must take required minimum distributions.
A QCD can count toward your RMD for the year.
So if you have to pull money out anyway and you plan to give some away, sending it directly to charity can satisfy that requirement while keeping the amount out of your taxable income.
The transfer must go directly from the IRA to the charity — if you withdraw the money first and write a check, it doesn't qualify.
You can't claim a charitable deduction for the same gift.
And the gift has to go to a qualified 501(c)(3) organization, not a private foundation or a donor-advised fund.
You also need to be 70½ at the time of the transfer, not just turning that age during the year.
And each IRA must be handled separately when you request the distribution.
One practical wrinkle: not every brokerage makes this easy.
Some let you request a QCD online, while others require a phone call or a form.
Ask for the check to be made payable to the charity, and get the tax paperwork right.
Your IRA custodian should report the distribution on Form 1099-R, and you or your tax preparer will note that it's a QCD so it isn't taxed.
The gift has to leave your IRA by Dec. 31 to count for that tax year, so don't wait until late December to start the paperwork. **Our take:** A QCD isn't right for everyone, and it only helps if you're already giving to charity and are old enough to qualify.
But for retirees sitting on a large traditional IRA who want to give, it's one of the few moves that lowers taxable income without touching a deduction.
Final Thoughts
Worth a call to your tax pro before year-end.