Qualified Charitable Distributions Can Lower Your Taxes! Find Out How

January 4, 2021 · Saving & Spending

A senior woman smiling while volunteering in a sunny community garden, representing charitable giving. — A smiling senior woman hands a potted plant to a young girl at a community volunteer event.

Are there any rules for QCDs?

Yes, much with everything in life, there are certain rules you must observe when making QCDs. Luckily, they are rather simple.

You have to be 70½ or older
In order for the QCD to satisfy your current year’s RMD, the direct transfer has to be made from your IRA within the time limit laid down for your RMD. In most cases, the deadline is December 31.
The annual amount of a QCD for any individual is limited to $100,000. This applies to one big contribution or several smaller contributions made in a calendar year.
Your QCD can’t be higher than the amount of money that would be subjected to taxes as ordinary income. In other words, your donations cannot exceed your owed taxes and tax refunds.

Keep in mind that making contributions to an IRA may decrease the deductible amount of the QCD.

Who can make Qualified Charitable Distributions?

If you are 70½ or older and have a traditional IRA, you are allowed to make Qualified Charitable Distributions. Having said that, you should also know that the QCD rules are only applicable when it comes to IRAs, but not to 401(k)s, 403(b)s, SIMPLE, or SEP IRAs.

Make sure you also take a look at these 10 Dangerous Myths That Could Leave You Broke in Retirement!