Qualified Charitable Distributions (QCDs) are direct transfers of funds from an individual retirement account (IRA) to a qualified charity that can be excluded from taxable income.
To qualify as a QCD, the distribution must be made directly from a traditional IRA or Roth IRA to an eligible charity, and the account holder must be at least 70½ years old at the time of the distribution. QCDs can count towards an individual’s required minimum distribution (RMD) for the year, allowing taxpayers to meet their RMD obligations while reducing their taxable income.
For example, if a taxpayer aged 72 makes a $10,000 QCD to a qualified charity, that amount is not included in their taxable income, effectively lowering their overall tax liability for the year.
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