The increase of the standard deduction in the tax act passed at the end of 2017 resulted in far fewer taxpayers itemizing their deductions, eliminating the tax savings for charitable donations for those non-itemizing donors. But there is good news for donors 70 ½ or older. The “Qualified Charitable Distribution (QCD), sometimes called the “IRA Charitable Rollover,” can provide you the same tax benefit as an itemized deduction for those who no longer itemize because QCD gifts are not included in your income. Here are the requirements for a QCD gift:
- You must be 70 ½ or older at the time of the gift.
- Gifts must go directly from your IRA to Community Foundation for Monterey County.
- The total of all your QCD gifts for 2024 cannot exceed $105,000 per person however, your spouse with a separate IRA can make a QCD of up to $105,000 in 2024 if they otherwise qualify.
- You can not take an income tax charitable deduction for your gift.
If you are 70½ or older, there are tax-smart reasons to make a QCD. If you are taking the standard deduction and no longer itemizing your income tax charitable deductions, the QCD could be right for you. A QCD gift to charity is not included in your taxable income. The tax impact is as if you made a fully deductible gift to charity without increasing your income.
If you are age 72 or older making a gift counts toward your RMD, and it is not included in your taxable income. Using your RMD as a charitable contribution will exclude that amount from your adjusted-gross income (AGI) for the year, which means that in addition to reducing your income taxes, it also can decrease the amount of Social Security that is subject to tax and potentially lower your Medicare premiums. In addition to saving taxes, you will be making an immediate impact on the lives of those who need Community Foundation for Monterey County the most.
Your IRA administrator can help you make a Qualified Charitable Distribution from your IRA. Many administrators require you to use their QCD distribution form and comply with other requirements. Follow your financial institution’s forms and procedures to ensure you receive the tax benefits of a QCD.
