If you’re charitably minded and in your 70s, there’s a powerful tax strategy you may be overlooking: Qualified Charitable Distributions (QCDs).
Typically, withdrawing money from an IRA is taxable. Once Required Minimum Distributions (RMDs) begin at age 73, that additional income can increase your tax bill and potentially expose you to Medicare IRMAA surcharges.
One way to reduce taxable income from your IRA is to do a QCD. If you are at least age 70½, you can donate to charity straight from your IRA or inherited IRA without paying tax on the distribution.
As long as the funds go directly from your IRA straight to a qualified 501(c)(3) charity, without passing through your bank account, then the distribution won’t hit your taxable income! QCDs can also count towards your annual required minimum distribution (RMD) amount.
There are some rules and restrictions to keep in mind:
- You must be at least 70½ years old at the time of the donation.
- The donation must go to a qualified 501(c)(3) charity. You cannot gift the funds to a person, donor-advised fund, or private foundation.
- The funds must move directly from your IRA to the charity. It cannot hit your bank account first.
- Make sure to keep the receipt and properly report the donation on your tax return.
- You can’t receive anything in return for your donation. For example, if a charity gives you merchandise, dinner tickets, or other perks in return for a donation, these will make the QCD ineligible.
- In 2026, the maximum QCD limit is $110,000 per person per year, indexed for inflation.
If you’re approaching RMD age and are charitably inclined, it may be worth reviewing if QCDs fit into your retirement plan. If you want to plan your retirement in a tax-smart way, let’s have a conversation! Reach out to schedule a conversation with an advisor today.
This article is provided by Spraker West Wealth Management, a registered investment advisor, and is for informational purposes only. It should not be construed as investment advice and is not intended as a solicitation of any specific product or service. Investments and/or investment strategies include risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives. Information provided is not intended as tax or legal advice and should not be relied upon as such. You are encouraged to seek tax or legal advice from a qualified professional.