If you are 70½ or older and have a traditional IRA, there is a move that can send money to charity and cut your tax bill at the same time.
It is called a qualified charitable distribution, or QCD, and it has been around for years.
Yet plenty of retirees still miss it, often because their advisor never brings it up.
You ask your IRA custodian to send money directly from your IRA to a qualified charity.
The amount is excluded from your taxable income, up to $105,000 per person in 2024.
That limit is indexed for inflation, so it can rise over time.
The word "directly" is where people get tripped up.
If the check lands in your bank account first, the IRS treats it as a normal withdrawal.
You would then owe income tax on it and have to itemize to claim a deduction.
Done right, the money never touches your hands.
Because the standard deduction jumped in 2018, and most retirees no longer itemize.
That killed the tax benefit of writing a check to charity for millions of households.
A QCD sidesteps the problem entirely, because it works whether or not you itemize.
There is a second benefit that gets even less attention.
Once you turn 73, you face required minimum distributions from your IRA.
Those RMDs count as income and can push you into a higher tax bracket.
They can also raise your Medicare premium two years later.
A QCD can satisfy part or all of your RMD, which keeps that income off your return.
The transfer has to clear before year-end, and custodians get swamped.
If you want the gift counted for this tax year, start the paperwork in November, not the last week of December.
QCDs come only from IRAs, including traditional and Roth IRAs that hold pretax money.
You cannot use a 401(k), a 403(b), or a SEP or SIMPLE IRA that is still receiving contributions.
Most churches and public nonprofits qualify; donor-advised funds and private foundations generally do not.
Get a receipt from the charity and a statement from your custodian showing the transfer.
The IRS wants proof the money went straight from the IRA to the charity.
If you file your own taxes, tell your preparer the amount and the date.
One more wrinkle: you can make a one-time QCD of up to $53,000 to a split-interest entity, such as a charitable remainder trust.
That option arrived in 2023 and is indexed for inflation.
It is niche, but it can appeal to retirees who want income for life plus a charitable gift.
If you give to charity and you are 70½ or older, run the numbers with a tax pro before writing another check.
For many retirees, the QCD is the rare move that helps the charity and the taxpayer at the same time.
Final Thoughts
The catch is that it only works if you set it up correctly and early.