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Qualified Charitable Distributions Can Lower Your Taxes! Find Out How

January 4, 2021 · Saving & Spending

Can couples maximize their QCDs?

Yes. QCDs cannot exceed $100,000 per person, per year. However, a married couple can make a donation as high as $200,000, if each spouse has an IRA and sticks to the $100,000 limit.

Read also 26 States That Do Not Tax Your Social Security Benefits.

What taxes do you have to pay for QCDs?

Compared to the distributions from your traditional IRA, donations made to qualified charities are not subject to any state or federal withholding taxes. You simply file your IRS Form 1099-R and report the distributions made to qualified charities as normal distributions. Keep in mind that charitable donations made from an inherited IRA or an inherited Roth IRA should be reported as death distributions.

The good thing about QCDs is that you no longer have to itemize your deductions. This means you can benefit from the higher standard tax deduction brought by the Tax Cuts and Jobs Act (TCJA) in 2017 and still make charitable donations to those in need. Before you do your victory dance, just know that although the IRS will not tax your QCD, it will not allow you to claim the distribution as a charitable tax deduction.

See also Will Taxing the Rich Save Social Security? Experts Weigh in.

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