Qualified Charitable Distribution Planning

Income Tax Reduction by Charitable Giving

  • Wealth Planning

Qualified Charitable Distribution Planning: Income Tax Reduction by Charitable Giving

In Summary

Qualified Charitable Distribution Planning offers retirees a valuable opportunity to have a positive impact while simultaneously minimizing their taxable income. This planning guide provides crucial insights and necessary prerequisites for implementing this tax reduction strategy.

Major Takeaways

  • Qualified Charitable Distribution (QCD) planning laws allow individuals who are at least 70 ½ years old to make donations from their Individual Retirement Accounts (IRAs) directly to eligible charitable organizations.
  • For an IRA distribution to be considered a QCD and be excluded from income, specific requirements must be satisfied.
  • Despite changes to the Required Minimum Distribution age in the SECURE Act and the SECURE 2.0 Act, an IRA distribution made when the owner reaches age 70 ½ can still qualify as a QCD.
  • A donor who itemizes deductions cannot claim a charitable contribution deduction for a distribution already treated as a QCD.
  • QCDs can help minimize Adjusted Gross Income and taxable income resulting in various tax benefits. The maximum annual QCD exclusion amount, $100,000 for 2023, limits the amount that donors can exclude from their gross income each year.