Broker Check


| August 23, 2018


What if you could make an IRA distribution non-taxable?

If you are at least age 70-1/2 - the age when you are required to take minimum distributions from your IRA – you probably can!

The Protect Americans from Tax Hikes Act of 2015 permanently allowed taxpayers age 70-1/2 and older to exclude from gross income IRA distributions that were paid directly to a qualified charity. You can exclude up to $100,000 of Qualified Charitable Distributions (QCDs) from your gross income each year and if you file a joint return, your spouse can exclude an additional $100,000.

QCDs count toward satisfying the required minimum distribution from your IRA.  But, the distribution must be paid by your IRA custodian directly to the charity to exclude it from your income (therefore making it non-taxable).

Why is better to use a QCD than to take an IRA distribution and then make a tax-deductible donation?

The IRA distribution is not added to your other income for purposes of calculating adjusted gross income.  Your adjusted gross income is used for many purposes on your tax return, such as helping determine your eligibility to take certain deductions.  

And, when the standard deduction for married couples filing jointly is increased this year to $24,000 from $12,700 in 2017, you may get the full benefit of your charitable contribution in addition to your standard deduction.

Say again?  That’s right!  While charitable donations are generally a tax-deductible item, if your itemized deductions do not exceed $24,000 in 2018 and you do not use a QCD, you are likely to not receive any tax benefit for donations. 

For instance, if you made a charitable donation of $12,000 and it was your only itemized deduction, the amount of the charitable donation would be included in the standard deduction of $24,000.  If you made a QCD of $12,000 and received the standard deduction, you would get the tax benefit of both the donation of $12,000 and the $24,000 standard deduction.

This is a simple example, while unfortunately most tax returns are not.  Be sure to check with your tax accountant and financial planner to see if the QCD makes sense for you!







Laura Mickels has spent more than 30 years working for investors with both Wall Street and independent firms.  CochranMickels Retirement Specialists provides personalized planning and investment services to individuals approaching and in retirement.


These are the opinions of Laura Mickels and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.