AFTER YEARS OF uncertainty, Congress voted in late 2015 to make so-called qualified charitable distributions, or QCDs, a permanent part of the tax code. The QCD provision allows those in their 70s and older to contribute up to $100,000 directly from their IRA to a qualified charity. The contribution counts toward their annual required minimum distribution.
The charitable gift isn’t tax-deductible—but the IRA distribution also isn’t included in your taxable income, which could have tax advantages. For instance, a QCD might help those who don’t itemize their deductions or whose itemized deductions—even including any charitable gifts—aren’t much higher than their standard deduction. Many retirees will find themselves in this situation, thanks to the higher standard deduction introduced by 2017’s tax law.
By making a qualified charitable distribution, you also lower your modified adjusted gross income. This can have a variety of benefits, including reducing your premiums for Medicare Part B and Medicare’s prescription drug benefit, lowering the tax you pay on your monthly Social Security check and trimming the impact of the 3.8% Medicare surtax.
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