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Taxes, Retirement Planning and Estate Planning

A QCD (Qualified Charitable Distribution) is generally a non-taxable RMD (Required Minimum Distribution) from your IRA when you instruct the trustee of your IRA (other than a SEP or SIMPLE IRA) to send the distribution directly to an organization eligible to receive the tax-deductible donation. The maximum annual QCD is limited to $100,000 per tax year by an individual taxpayer. For married couples, each spouse can make a QCD up to the $100,000 annual limit from their own IRA, for a potential of $200,000. Be careful, one spouse cannot reach into the other spouse’s IRA to be eligible for their own QCD deduction. A few points of clarification here:

  1. You must not receive access to these funds; it is imperative that these donations be sent directly by the trustee of your IRA to what is known as the qualified charity.

  2. The IRS maintains a directory of qualified charities. You can check to see if your intended charities are on this list by using the IRS search tool called Tax Exempt Organization Search tool, located at:

  3. To clarify the word “generally” in the opening sentence above, QCDs are available to IRA owners who are at least age 70 ½ . The SECURE Act did not change this to age 72. This means QCDs extend a bit beyond RMDs. A taxpayer younger than age 70 ½ does not qualify for a QCD.

You may be thinking this is no big deal, why would I not just take my annual RMD and disburse it to my charities directly? Our tax laws are very nuanced, by following the QCD rules your charitable donation is taken “above the line.” This means you get to take the tax deduction before AGI (Adjusted Gross Income) is determined. This is powerful for a few reasons:

  1. You do not have to itemize deductions to obtain the QCD charitable contribution deduction.

  2. Many deductions are limited or phased out at certain AGI threshold levels. A deduction before AGI (above the line) makes it potentially more valuable by reducing your AGI by your charitable donation.

  3. Several benefits are based on AGI thresholds, such as Medicare premiums along with the taxability of Social Security income.

If you qualify for a QCD, and you intend to make charitable cash donations then taking advantage of a QCD is well worth it.

Another nuance here is QCDs are available to all RMDs along with taxpayers who are not quite old enough to take RMDs. Remember, the SECURE Act did not change the QCD eligibility age to 72, it remains at age 70 ½ . For IRA owners with large account balances this head start trims the prior year-end balances, which are used to determine the subsequent amount of your RMD.

If you own an Inherited IRA, click Here to learn how the new proposed distribution rules may impact your beneficiaries and your current estate plans.


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