Starting at age 73 the IRS mandates IRA owners to take annual income withdrawals, known as Required Minimum Distributions (RMDs). Failure to take these withdrawals could subject IRA owners to stiff penalties.
Rather than being forced to take a distribution that can raise your taxable income, many donors use their RMDs to make a Qualified Charitable Deduction (QCD). A QCD excludes the amount donated from taxable income and may reduce the impact to certain tax credits and deductions, including Social Security and Medicare. Also, QCDs don’t require that you itemize on your taxes. There are certain requirements that must be met to use your RMD as a QCD, including:
- You must be 70 ½ or older to be eligible to make a QCD.
- At age 73 you are required to take a distribution from your retirement accounts.
- QCDs are limited to the amount that would otherwise be taxed as ordinary income. This excludes non-deductible contributions.
- The maximum annual amount that can qualify for a QCD is $100,000 for individuals and $200,000 for married couples.
- For a QCD to count towards your current year’s RMD, the funds must come out of your IRA by your RMD deadline, generally December 31.
