If you are 70½ or older and you have ever written a check to a charity from your checking account, you may be leaving money on the table.
There is a move called a qualified charitable distribution, or QCD, and it lets you send money straight from an IRA to a charity.
The gift counts toward your required minimum distribution, but it never shows up as taxable income on your return.
A normal withdrawal from a traditional IRA gets added to your adjusted gross income, even if you donate the same amount a week later.
Your AGI is the number that decides how much of your Social Security is taxed, what you pay for Medicare Part B and Part D, and whether you owe the new surtax on net investment income.
The mechanics are simple, but the details trip people up.
You must be at least 70½ on the day of the transfer.
The money has to move directly from the IRA custodian to the charity, never through your own hands.
If a check is made out to you, the IRS treats it as a taxable withdrawal.
You can give up to $105,000 per person in 2024, and a married couple with separate IRAs can each use that full limit.
Where it gets interesting is the standard deduction.
Since the 2017 tax law nearly doubled it, millions of retirees no longer itemize, which means their charitable gifts give them no tax break at all.
For a 72-year-old taking a $30,000 required distribution, sending $10,000 of it to a food bank can cut taxable income by a third without touching the rest of the portfolio.
QCDs cannot go to a private foundation or a donor-advised fund, and they cannot fund a gift annuity.
The charity must be a qualifying 501(c)(3).
You will not get a charitable deduction for the gift, because you never reported the income in the first place.
Keep the receipt anyway, since the IRS wants a written acknowledgment for any gift of $250 or more.
One more wrinkle: if you make a QCD in a year when you also take a regular withdrawal, the order matters for your tax paperwork.
Custodians typically apply distributions to your RMD first, so a QCD early in the year is the cleanest way to satisfy the requirement.
Ask your plan administrator to code it correctly, and check the year-end statement to confirm the amount was excluded from your 1099-R taxable box.
For retirees who give anyway, this is less a loophole than a correction.
The tax code already lets you support a cause you believe in.
The QCD just stops the IRS from taking a cut of money you never planned to spend on yourself.
Final Thoughts
If you are charitably inclined and sitting on a traditional IRA, it is worth a call to your custodian before the calendar turns.