Qualified Charitable Distributions: A Smarter Way to Give in Retirement
You’ve been giving to your church or favorite charity for years.
Maybe it’s a monthly check. Or maybe you write one big check at year-end as tax time approaches. You believe in being generous, in using your wealth for good.
But here’s a question: Are you giving in the most tax-efficient way possible?
If you’re over 70½ and have money in a traditional IRA, there’s a little-known strategy that could save you thousands in taxes while allowing you to be even more generous.
It’s called a Qualified Charitable Distribution (QCD). If you’ve never heard of it, you’re not alone—and you might be paying more taxes than you need to.
What is a Qualified Charitable Distribution?
A Qualified Charitable Distribution is a direct transfer of funds from your IRA to a qualified charity.
Here’s what makes it powerful: The amount you transfer counts toward your required minimum distribution (RMD), but it’s excluded from your taxable income.
In other words, a QCD helps satisfy your RMD requirement without increasing your tax bill. Plus, you help support a cause or organization you believe in. That’s a win-win-win!
Who can use a Qualified Charitable Distribution?
To take advantage of a QCD, you need to meet these requirements:
- Age 70½ or older – You must be at least 70½ when the distribution is made. (Note: This is different from the RMD age of 73 or 75.)
- IRA account – The distribution must come from a traditional IRA. You can also use a Roth IRA, but the tax benefits are less significant since Roth withdrawals are already tax-free.
- Direct transfer – The money must go directly from your IRA to the charity. You cannot withdraw it yourself and then donate it.
- Qualified charity – The receiving organization must be a 501(c)(3) charity. Donor-advised funds and private foundations don’t qualify. Most churches do qualify.
The bigger picture
At Meriwether, we believe your wealth should reflect your values. If being generous and supporting causes you care about are important to you, we want to help you do that in the smartest way possible.
A Qualified Charitable Distribution is just one example of how strategic planning can help you give more while paying less in taxes. It’s not about being cheap – it’s about being a wise steward of your resources.
For years, we’ve been helping clients align their finances with their values. We help them figure out how to be generous and tax-smart at the same time.
If you’re charitably minded and want to be sure you’re giving in the most effective way possible, let’s talk.
Read our article about retirement budgets for other ideas!
This content is for educational purposes only and should not be considered personalized financial advice. Please consult with a qualified financial professional to discuss your specific situation and needs.