A Qualified Charitable Distribution (QCD) is a tax-free direct transfer of funds from your IRA to a qualified charitable organization other than a Donor-Advised Fund. You must be over the age of 70 1/2 at the time of the QCD transaction. QCD’s are a great way to claim both federal and state tax benefit for charitable gifts even when claiming the Standard Deduction.
For individuals subject to the Required Minimum Distribution (RMD) rules on qualified retirement accounts, a QCD can reduce the taxability of the RMD.
Account Types
The account types that are eligible for QCDs include:
- Traditional and Inherited IRAs
- SEP IRA (inactive plans only)
- Simple IRA (inactive plans only)
Distribution Limit
The maximum annual distribution amount that can qualify for QCD treatment is $100,000. This limit would apply to the sum of QCDs made to one or more charities in a calendar year. If you’re a joint tax filer, both you and your spouse can make up to $100,000 in QCDs from your respective IRA. This limit applies to the sum of QCDs made by a single taxpayer in one calendar year.
Read more about QCDs from Schwab.