In December 2015, Congress made permanent a law allowing donations from an individual retirement account (IRA) when the donor turns 70 1/2 years old without counting the distribution as taxable income.  This type of charitable gift is called a Qualified Charitable Distribution (QCD) and it means you can potentially make a “Tax Free” charitable contribution from your IRA.

Normally, when you take money out of your IRA it is a taxable event.  The withdrawal adds to your taxable income and increases your adjusted gross income (AGI).  Because a QCD is not taxable income in the first place, it has no effect on your AGI.  Giving a QCD directly from your IRA can allow you to benefit from charitable giving even if you don’t normally itemize your deductions.  Giving directly from your IRA allows you to ignore your QCD IRA distribution when calculating your taxable income and also take the standard deduction.

To be considered a QCD, the following criteria need to be met:

  • Donor is older than 70 1/2 at the time of the contribution
  • The QCD comes from an IRA
  • The contribution must be made directly to the qualifying charity
  • Donor receives a confirmation letter from the charity.  The letter must state that you did not receive any goods or services from the charity.

For more information, visit the following:

 To set up a QCD, work through your financial institution that services your IRA or contact your financial adviser.

(Some of this information was gathered from an article by Robert Heuermann, “Ten minutes to tax savings”, Our Catholic Journey; Sept/Oct 2016, page 18.)

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