Guidance on Tax-Free IRA Distributions to Charity

Dear Client

If you generally receive distributions from your IRA and make charitable contributions during the year, you may benefit from arranging a qualified charitable distribution (QCD). A QCD is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to a charitable organization.

A QCD counts towards your required minimum distribution. The amount of the distribution that is transferred directly to the charity is not included in your adjusted gross income. On the other hand, you can’t claim a charitable contribution deduction for any QCD not included in income. However, by making a QCD, you receive the full benefit of the charitable contribution even if you don’t itemize. In addition, this may reduce the tax impact of other income and deductions, such as the amount of taxable social security benefits.

You must be at least age 70 1/2 when the distribution is made. The maximum annual exclusion for QCDs is $100,000. Any QCD in excess of the $100,000 exclusion limit is included in income as any other distribution. If you file a joint return, your spouse can also have a QCD and exclude up to $100,000. The amount of the QCD is limited to the amount of the distribution that would otherwise be included in income. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of otherwise taxable income.

Although a charitable contribution may be motivated by humanitarian reasons rather than by tax considerations, it is, nevertheless, wise to take tax considerations into account when making a contribution. Please call our office at your earliest convenience to discuss the QCD option as it applies to your charitable tax planning.


Jerry E. Bartram, CPA