– Individuals aged 70 ½ or older who are taking distributions from a traditional IRA can direct up to $100,000 per year of their IRA distributions to charity.
– These qualified charitable distributions (QCDs) count toward required minimum distributions (RMDs) but do not increase adjusted gross income (AGI) or generate a tax bill.
– Keeping the donation out of AGI can help qualify for other tax breaks, avoid taxes on Social Security benefits and investment income, and avoid high-income surcharges for Medicare Part B and Part D premiums.
– QCDs are not subject to federal estate tax and generally not subject to state death taxes.
– A charitable contribution deduction cannot be claimed for a QCD not included in income.
– The age to begin making QCDs is 70 ½, while the age for RMDs is 72. – To benefit from a QCD for 2022, one must arrange for a distribution to be paid directly from the IRA to a qualified charity by December 31, 2022.
– QCDs can be used to satisfy all or part of the amount of RMDs from an IRA. For example, if the 2022 RMDs are $10,000 and a $5,000 QCD is made for 2022, another $5,000 must be withdrawn to satisfy the 2022 RMDs.
IRA Charitable Donations: An Alternative to Taxable Required Distributions
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