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Understanding Qualified Charitable Distributions

A sound financial plan should proactively evaluate and manage IRA distribution requirements on an ongoing basis. Qualified Charitable Distributions (QCDs) pave a clear path for individuals interested in charitable giving to meet the IRS’ minimum distribution requirements while minimizing taxes.

QCDs allow IRA owners over the age of 70 ½ to make tax-free charitable donations of up to $100,000 directly from their IRA. If individuals are over the required minimum distribution (RMD) age, QCDs will go toward or satisfy minimum distribution requirements.

Aside from satisfying requirements and fulfilling personal philanthropic goals, QCDs can result in additional financial benefits. As QCDs do not count toward taxable income like typical IRA withdrawals, a QCD can lower an individual’s taxable income, potentially placing the individual into a lower income tax bracket or even reducing monthly Medicare premiums.

However, there are some limitations to consider before implementing a QCD. Donations must go to charities that meet the qualifications outlined in the tax code. This excludes private foundations, auctions, and commonly used donor-advised funds (DAF).

To learn more about QCDs and whether they align with your personal goals, contact a KMG advisor.