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Charitable Contributions from IRAs

Charitable Contributions from IRAs

Did you know that, if you are at least 70.5 or older, you can make tax-free charitable donations directly from your IRA? By making what's called a qualified charitable distribution (QCD), you can benefit your favorite charity while excluding up to $100,000 annually from gross income. These gifts, also known as " IRA charitable rollovers," would otherwise be taxable IRA distributions.


The Pension Protection Act of 2006 first allowed taxpayers age 70.5 or older to make tax-free charitable donations directly from their IRAs. The law was originally scheduled to expire in 2007 but was extended periodically through 2014 by subsequent legislation. It was finally made permanent by the Protecting Americans from Tax Hikes (PATH) Act of 2015.

How QCDs work

You must be 70.5 or older to make a QCD and a QCD cannot be made from a SEP or SIMPLE IRA. You direct your IRA trustee to make a distribution directly from your IRA a 501(c)(3) organization that is eligible to receive tax-deductible contributions . This distribution must be one that would otherwise be taxable to you. You can exclude up to $100,000 of QCDs from your gross income each year, thereby avoiding taxation on those amounts. If you file a joint return, your spouse can exclude an additional $100,000 of QCDs. Note: You don't get to deduct QCDs as a charitable contribution on your federal income tax return.

QCDs count toward satisfying any required minimum distributions (RMDs) that you would otherwise have to receive from your IRA, just as if you had received an actual distribution from the plan. However, distributions that you receive from your IRA (including RMDs) that you subsequently transfer to a charity cannot qualify as QCDs.

A QCD must be an otherwise taxable distribution from your IRA. If you've made nondeductible contributions, then normally each distribution carries with it a pro-rata amount of taxable and nontaxable dollars. However, a special rule applies to QCDs — the pro-rata rule is ignored, and your taxable dollars are treated as distributed first. (If you have multiple IRAs, they are aggregated when calculating the taxable and nontaxable portion of a distribution from any one IRA. RMDs are calculated separately for each IRA you own but may be taken from any of your IRAs.)

Why are QCDs important?

Without this special rule, taking a distribution from your IRA and donating the proceeds to a charity could be a bit more difficult. You would need to request a distribution from the IRA, and then make the contribution to the charity. You'd receive a corresponding income tax deduction for the charitable contribution if you choose to itemize. But the additional tax from the distribution may be more than the charitable deduction. QCDs avoid all this, by providing an exclusion from income for the amount paid directly from your IRA to the charity — you don't report the IRA distribution in your gross income, and you don't take a deduction for the QCD. The exclusion from gross income for QCDs also provides a tax-effective way for taxpayers who don't itemize deductions to make charitable contributions. And, due to much higher standard deduction amounts ushered in by the Tax Cuts and Jobs Act passed in 2017, itemizing deductions may be even less beneficial than prior to 2018, rendering QCDs even more appealing to some.

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