• From a traditional IRA or Roth IRA
• Transferred directly from the IRA Trustee to the charitable organization
• Made on or after the IRA owner has reached age 70 ½
• Contributed to a qualified charitable organization, as defined by IRC Section 170(b)(1)(a)
There are several tax benefits of QCDs, the most notable of which is that the distribution is not included in your Adjusted Gross Income (AGI). This can provide a significant benefit over taking a distribution personally and then making a charitable contribution personally, which results in higher AGI and then (in many cases) a higher tax rate applied to your other taxable income, and potentially a limitation on the amount of the charitable contribution deduction that you are allowed to claim. In addition, the QCD still qualifies as a distribution for the purpose of satisfying your annual Required Minimum Distribution amount.
For a more comprehensive explanation of this tool and its multiple tax benefits, please see the recently published Forbes article: “Qualified Charitable Distributions (QCDs) from IRAs.”