Knowing the ins and outs of qualified charitable distributions (QCD) can ultimately save you time and money down the road. A QCD is generally a nontaxable distribution from your IRA account made to an organization eligible to receive tax deductible contributions. If you’re over the age of 70½, you may transfer up to $100,000 from your IRA to a charitable organization without having to include the income on your Form 1040. If you file a joint return, your spouse can also have a QCD and exclude up to $100,000.
Making this type of distribution allows you to report less income, which could help reduce the impact on taxable social security benefits. Here are a few additional things to keep in mind:
• Any QCD in excess of the $100,000 exclusion limit is included in income as any other distribution.
• The amount of the QCD is limited to the amount of the distribution that would otherwise be included in income.
• If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of otherwise taxable income.
A QCD will count towards your required minimum distribution; however, you cannot claim a charitable contribution deduction for any QCD not included in your income.