Did you know it’s possible to get a tax benefit from a charitable contribution even if you don’t itemize deductions? In year-end legislation, qualified charitable distributions (QCDs) from individual retirement accounts (IRAs) were made a permanent part of the tax law. This means that taxpayers 70-1/2 and older may donate all or part of their required minimum distribution to a qualified charity and not include it in their taxable income. The distribution needs to be made directly from the IRA to the charity. There are advantages to QCDs as opposed to taking a taxable IRA distribution and then contributing the proceeds to a charity. That’s because taxable IRA distributions must be included in adjusted gross income. This affects items such as the taxable portion of Social Security benefits, deductions limited by AGI, and possibly future Medicare insurance premiums. QCD’s can be an important vehicle for those who wish to donate to charities and are not dependent on their IRA distribution for living expenses.
Here's the fine print: The amount of a QCD is limited to the amount of the distribution that would be included in income, up to $100,000 annually. The QCD must be, aside from the percentage of AGI limits, eligible for a charitable contribution deduction and adequate documentation obtained. See IRS Publication 590-B for details.
This information is for general and educational use only and not intended as tax or legal advice. Tax situations vary significantly from person to person so it's always best to consult your own professional preparer for deductions that may apply to you.