If you're 70½ or older and sitting on a traditional IRA you don't really need, there's a move that can shrink your taxable income and help a cause at the same time.
It's called a qualified charitable distribution, or QCD, and it's one of the few tax breaks that still rewards giving directly from retirement savings.
You ask your IRA custodian to send money straight to a qualifying charity.
The amount never counts as taxable income to you, and it can satisfy your required minimum distribution for the year.
That last part matters, because once you hit RMD age, the government forces you to pull money out whether you want to or not.
The age rules have shifted in recent years, so double-check yours.
The IRS currently lets you start QCDs at 70½, even though required minimum distributions now generally begin later.
That gap gives some retirees a window to give from the IRA before the forced withdrawals even kick in.
The limit is $105,000 per person for 2024, and it's indexed for inflation in later years.
A married couple with separate IRAs can each use the full limit, which doubles the ceiling for households that want to give big.
The money has to go directly from the IRA to the charity.
If you take a distribution first and then write a check, it doesn't qualify.
You also need to confirm the charity is eligible, since donor-advised funds and private foundations generally don't count for QCD purposes.
One overlooked perk: a QCD can count toward your RMD without inflating your adjusted gross income.
That can help with things like Medicare premium surcharges and the taxable portion of Social Security, which are tied to income levels.
You won't get a charitable deduction for a QCD, because the money was never taxed in the first place.
And you'll want a written acknowledgment from the charity showing the amount and confirming no goods or services were received.
The transfer has to be completed by December 31 to count for that tax year, and custodians get swamped in December.
Start the paperwork in November if you can.
If you're charitably inclined and have more IRA money than you'll spend, this can be a cleaner path than writing checks from your bank account.
It keeps your taxable income lower and puts the dollars where you want them.
Our take: the QCD is one of the more generous breaks left in the tax code, but it only helps if you plan ahead.
Final Thoughts
Talk to your custodian and a tax professional before the calendar runs out.