As the end of 2024 approaches, so does your opportunity to reduce this year’s tax liability. For certain taxpayers, making Qualified Charitable Distributions (QCDs) from an IRA could be a smart move to lower taxable income while supporting a cause you care about.
Are You Eligible for a QCD?
To qualify for a QCD, you must be at least 70½ years old and either own an IRA or be a beneficiary of one. A key requirement is that the funds must be transferred directly from your IRA custodian to an IRS-approved charity—no middle steps.
How Does a QCD Work?
If you meet the eligibility criteria, you can donate up to $105,000 annually (indexed for inflation) from your IRA to an IRS-approved charity. If you and your spouse both qualify and file jointly, together you can contribute up to $210,000. Additionally, if you’re required to take annual minimum distributions from your IRA, the QCD can count toward fulfilling that requirement—provided all the conditions are met.
Tax Benefits of a QCD
While you can’t claim a QCD as a charitable deduction, the real benefit is that the amount donated is excluded from your taxable income. This can help you stay under certain income thresholds, potentially preserving eligibility for other tax breaks. Plus, you can make a QCD whether or not you itemize deductions, making it a great option if you plan to take the standard deduction.
Normally, distributions from a traditional IRA are subject to income tax, but a properly executed QCD is tax-free. It’s important to ensure the donation is made directly by your IRA custodian or trustee to the charity, or the tax benefits could be lost.
Next Steps
Tax laws and retirement planning strategies can be complex. Reach out to a HoganTaylor advisor today to ensure your QCD is executed correctly and aligns with your overall tax-saving strategy.
HoganTaylor Wealth
HoganTaylor Wealth provides an integrated approach to investment and financial planning and is a registered investment advisor and subsidiary of HoganTaylor LLP. HoganTaylor Wealth takes pride in serving clients as an independent fiduciary through holistic financial planning. Learn more at hogantaylor.com/wealth.
INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.
