Definition
A qualified charitable distribution is a direct transfer from an IRA to a charity that can satisfy required minimum distributions without adding to taxable income.
How It Works
An IRA owner at the eligible age directs funds straight to a qualified charity, up to an annual limit. The amount counts toward the year's RMD but is excluded from taxable income, which can be better than taking the distribution and deducting a gift.
Example
A retiree directs part of their RMD straight from the IRA to charity as a QCD, satisfying the RMD while keeping that amount out of taxable income.
When It Works Best
It works best for charitably inclined retirees subject to RMDs, especially those who do not itemize.
Who It Applies To
IRA owners at the eligible age with charitable intent.
Watch-Outs
The transfer must go directly from the IRA to the charity, donor-advised funds generally do not qualify, and an annual dollar limit applies.
