If you're 70½ or older and you write checks to charity every year, there's a good chance you're leaving money on the table.
The rule is called a qualified charitable distribution, or QCD, and it lets you send money straight from an IRA to a nonprofit.
The best part: that money never shows up as taxable income.
Once you hit 73, the IRS forces you to take required minimum distributions from your traditional IRA, whether you need the cash or not.
That withdrawal gets added to your taxable income, which can push you into a higher bracket, raise your Medicare premiums, and even shrink certain deductions.
You tell your IRA custodian to send a check directly to the charity.
The money moves from the account to the nonprofit without ever touching your bank account.
As long as it goes straight there, the IRS counts it toward your required withdrawal and keeps it out of your taxable income.
You can give up to $105,000 per person in 2024, and that figure adjusts for inflation in later years.
The charity has to be a legitimate 501(c)(3), and you can't use it for a private foundation or a donor-advised fund.
You also have to be at least 70½ on the day the gift is made.
One trap that catches people: if the check is made out to you and you forward it, the IRS treats it as a normal withdrawal.
You'd owe income tax on the whole amount, and your charitable deduction might not fully offset it.
The fix is to have the custodian write the check to the charity directly.
Another advantage is that you don't need to itemize.
Most retirees take the standard deduction, which means regular charitable gifts give them no tax benefit at all.
A QCD works whether you itemize or not, because it reduces your income instead of your deductions.
If you're charitably inclined and sitting on a traditional IRA, this is often the cleanest way to give.
Talk to your custodian before year-end, since these transfers can take a few weeks to process.
Ask specifically for a "qualified charitable distribution" so the paperwork is coded correctly.
If you've already taken your required withdrawal for the year, you may have missed the window.
But you can plan ahead for next year and set up a recurring QCD so the gift happens automatically.
Our take: this is one of the few tax breaks that rewards generosity without punishing you elsewhere.
Final Thoughts
If you're over 70½ and giving to charity anyway, ignoring it is basically volunteering to pay more tax than you owe.