Just a quick reminder for those of you aged 70 ½ and over who are also charitably inclined: There is no better way to gift from a tax standpoint than directly out of your Traditional IRA. Why? Money that comes straight from your IRA to a 501©(3) charity never hits your income for taxes. This could save you anywhere from 10% – 37% on the money that goes to charity. Don’t need the money to spend? That could mean an even larger gift.
This little loophole is called the Qualified Charitable Contribution or QCD.
You can use it for church tithing, your local animal shelter, or just about any charity. A few notes:
- There is no advantage to doing a QCD out of a Roth IRA. The distributions from a Roth aren’t taxable, anyway. Plus, there is no Required Minimum Distribution rule for Roth IRAs.
- You can’t claim a tax deduction on top of the gift directly to charity from your IRA. One or the other only – and the QCD is better.
- You cannot send your QCD to a Donor Advised Fund.
- You can donate a maximum amount of $100,000 per year as a QCD. That’s even if your RMD amount is lower.
- Married couples can donate up to $200,000, but you can’t split the limit any old way. In other words, the wife can’t donate $125,000 and the husband $75,000. It’s a maximum of $100,000 per person.
I hope that helps if you are in a position to donate to charity and are also taking RMDs. Happy gifting!