Over 70 1/2?  Make Charitable Contributions From Your IRA!

November 19, 2018  |  

Over 70 1/2? Make Charitable Contributions From Your IRA!

Key Takeaways

  • qualifying charitable distribution (QCD)allows you to donate up to $100,000 per year directly to a qualified charity from your IRA and exclude it from income.
  • QCDs can enable you to give to charity and shield some or all of your Required Minimum Distribution (RMD) from taxes.
  • QCDs require your contribution to go directly from your IRA to your chosen charitable organization.

As many successful people enter their retirement years, thoughts shift to giving back to society and perhaps some legacy planning. While most of you know the tax benefits of charitable giving, we’ve found that some clients aren’t familiar with qualifying charitable distributions (QCDs).

As we’ve discussed in the past, a QCD allows you to make tax-free donations of up to $100,000 per year directly from your IRA (or Roth IRA) to a qualified charity. More importantly, you can use QCDs to satisfy your annual Required Minimum Distribution (RMD) from your retirement account.  If you’re over the age of 70 ½ and already giving to charity, taking advantage of this tax strategy is a no-brainer!  It’s crazy not to consider this because the portion of your RMD that you donate to charity reduces your Adjusted Gross Income (AGI) dollar for dollar. Besides the charitable benefit, here are some other benefits a reduced AGI may provide:

  • Maximize charitable deduction.If you took $100,000 out of your IRA and then gave that sum to charity, the $100,000 donation is included in your gross income. Unfortunately, if the deduction amounts to more than 60 percent of your adjusted gross income (AGI), you will not be able to take the full deduction in the year of the contribution (although it can be carried forward). If this same donation is done through a QCD however, the $100,000 charitable contribution is not included in your AGI and is, in effect, deducted.  Note: You don’t get to deduct QCDs as a charitable contribution on your federal income tax return — that would be double-dipping.
  • Other savings. A lower AGI can reduce the amount of your Social Security benefits that are subject to tax and can increase the amount of medical and miscellaneous expenses you can deduct.  A lower AGI may also reduce your Medicare premium.
  • Double Up.Since the QCD rule applies to individual IRA’s, both you and your spouse (over 70 ½) can potentially double the benefit when filing jointly!

To take advantage of QCD’s the requirements are straightforward:

  • Funds must be drawn from an IRA – employer plans are not eligible.
  • Funds must go directly from the IRA institution (Schwab, Vanguard, etc.) to the charitable organization – i.e.you, the account holder should never touch the money!
  • The account owner must be at least age 70 ½.
  • The funds must go to a qualifying charitable organization – QCD’s cannot go to private foundations or donor advised funds.
  • $100,000 limit per year.

Real world example

Bob is an active and generous 72-year-old who gives to the SPCA every year. After retiring from a large corporation, he and his wife Jeanne have a substantial nest egg in Bob’s IRA. Bob wants to do more than sit on Boards and play golf.

As lifelong animal lovers, Bob and Jeanne have been donating $50,000 every year to the SPCA in their area. Coincidentally, the Required Minimum Distribution from Bob’s IRA – the amount the government requires Bob to withdrawal and pay taxes on this year – is also $50,000.  Bob will send the funds directly from his individual IRA to the SPCA to make his annual donation. Since the funds go directly from the IRA to the Society, it never hits their bank account and therefore is not included in their annual AGI, thus giving them a handsome charitable deduction.


For successful retirees over age 70-1/2, QCDs are a great tool for doing good for others while doing good for yourself and your family.  As always if you have questions, please feel free to contact us.

 Adviser is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals. 

About Mark Rioboli, CFP®, CFS

Mark A. Rioboli, CFP®, CFS is Director of Wealth Management for Independence Advisors, bringing over 30 years of experience in the wealth management industry. Have a question for Mark? CLICK HERE TO ASK MARK
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