On November 14th, 2024, the Internal Revenue Service (IRS) issued IR-2024-289 which increased the maximum tax-free charitable donations that can be made through a qualified charitable distribution (QCD). In years prior to 2024, the IRS limit for tax-free QCD’s was $100,000 for individual taxpayers and $200,000 for those who were married filing jointly and maintained separate IRA’s. For tax year 2024 and on, the IRS raised the amount by 5% to $105,000 per individual or $210,000 for married couples if they maintained separate IRA’s and both meet the age qualification.
As part of this update, QCD’s are now going to be subject to annual adjustment, based on inflation. In 2025, the limit will rise to $108,000.
In order to qualify the taxpayer must:
- Be at least 70 ½ or older.
- Make the Charitable distribution directly to the charity from his or her IRA
- Donation must be made before Year End
If you are age 73 or older, and required to take a minimum distribution from your retirement account, QCDs will count toward that year’s required minimum distribution (RMD).
What is a Qualified Charitable Distribution or QCD?
A qualified charitable distribution or QCD is a donation made from an IRA directly to a charitable organization.
How does a QCD help me?
For taxpayers who are charitably inclined and may not be able to itemize, the QCD allows taxpayers to use their IRA to both meet their RMD requirements for the year, without increasing their taxable income, and hep a charity or charities that are important to you. By excluding the QCD from a taxpayer’s adjusted gross income, the taxpayer might be eligible for other tax benefits that would have otherwise been lost if their AGI exceeded certain limits.
Other Notes
IRA custodians do not report the QCD on the 1099-R. The taxable distribution amount reported on line 2 of the 1099-R is not reduced by the QCD so it is important that taxpayers communicate any QCDs to their tax preparer.
