Qualified Charitable Distributions (QCDs): A Tax-Efficient Giving Strategy That Many Are Unaware Of!

If you’re exploring ways to support the causes you care about while managing your taxable income, a Qualified Charitable Distribution (QCD) may fit your goals. This direct IRA-to-charity transfer can satisfy your required minimum distribution (RMD) and remove the gifted amount from your adjusted gross income—helping you give more, potentially pay less tax, and simplify year-end planning.

What Is a QCD?

A QCD is a trustee-to-charity transfer from your pre-tax IRA to an eligible nonprofit. Key eligibility requirements:

• You must be age 70½ or older at the time of transfer.

• The distribution goes directly from your IRA custodian to the charity.

• Charities must qualify under IRC §170(b)(1)(A); donor-advised funds and most supporting organizations are excluded.

Why Prospective Clients Should Consider QCDs

• Maximize Charitable Impact

Your gift reaches charity tax-efficiently, without first passing through your personal account.

• Manage Taxable Income

QCDs are excluded from gross income, helping you control Adjusted Gross Income (AGI) and potentially reduce Medicare premiums or bracket creep.

• Satisfy RMDs Easily

Up to $108,000 per year counts toward your RMD, eliminating excess-distribution penalties without additional deduction paperwork.

Quick Comparison: QCD vs. Cash Donation

Age Requirement

• QCD: 70½ or older

• Cash Donation with Itemized Deduction: None

Maximum Annual Amount (2025)

• QCD: $108,000 per individual

• Cash Donation with Itemized Deduction: Subject to AGI limits

Impact on Adjusted Gross Income (AGI)

• QCD: Excluded

• Cash Donation with Itemized Deduction: Reduces AGI only if you itemize deductions

Treatment as Required Minimum Distribution (RMD)

• QCD: Counts in full toward RMD

• Cash Donation with Itemized Deduction: No

How to Make a QCD Happen

1. Confirm Your Eligibility

• Verify you’re age 70½+ and choose a charity that meets IRC §170(b)(1)(A) rules.

2. Instruct Your IRA Custodian

• Request a trustee-to-charity transfer for the desired amount (up to $108,000).

3. Preserve Documentation

• Obtain transfer confirmations showing date, amount, and recipient details.

4. Review Your 1099-R

• Ensure Code Y correctly flags the QCD distribution on Form 1099-R.

Compliance and Record-Keeping

• Direct Transfers Only

Gifts routed through your personal account disqualify the QCD treatment.

• Maintain Clear Records

Keep copies of custodian and charity confirmations to support any inquiries.

• Coordinate with Your Tax Advisor

Confirm how a QCD integrates with your broader retirement and philanthropic plans.

Take the Next Step

Ready to explore whether Qualified Charitable Distributions align with your financial and charitable objectives? Patten Financial Group can help you:

• Identify eligible charities and transfer amounts

• Coordinate with your IRA custodian for a seamless QCD

• Document every step for tax-reporting and compliance

Contact us today to schedule a consultation and start maximizing your impact.

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