How Qualified Charitable Distributions (QCDs) Can Benefit You and Your Favorite Charity
Your retirement savings can do more than support your lifestyle—they can also help your favorite causes.
Understanding Your Options and Responsibilities
As you retire, it’s important to understand how your IRA can support your goals. While you can use IRA funds to supplement income, leave a legacy, or give to charity, you’re required to take annual Required Minimum Distributions (RMDs) starting at age 73 (per SECURE Act 2.0). These are taxed as ordinary income.
The government requires withdrawals to ensure you eventually pay taxes on money that was contributed tax-free. RMDs could increase your tax burden.
Using QCDs to Reduce Taxable Income
One option is to make a Qualified Charitable Distribution (QCD) from your IRA which counts toward your annual RMD. For example, if your RMD is $10,000 and you donate $6,000 as a QCD, only $4,000 is taxed.
How QCDs Work
· Eligibility: You must be 70½ or older.
· Direct Transfer: Funds must go directly from your IRA to a 501(c)(3) nonprofit.
· Eligible Accounts: Only IRAs qualify, not 401(k)s or 403(b)s.
· Tax Benefits: QCDs reduce your Adjusted Gross Income (AGI), which can lower taxes on Social Security benefits and reduce Medicare premiums.
· Counts Toward RMD: QCDs can satisfy your RMD in full.
· Qualified Charities: Must be a 501(c)(3); donor-advised funds and private foundations don’t qualify.
Making a QCD with Baker Boyer
· Confirm your charity’s eligibility.
· We can send the check directly or make it payable to the charity for you to deliver.
· Keep the check letter and request a receipt from the nonprofit.
· Coordinate with your CPA to ensure tax efficiency.
The Choice Is Yours
Baker Boyer’s experts are here to simplify things—helping you support the community while optimizing your tax strategy.
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