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Ask the Expert: Can I get a tax break for charitable donations from my IRA?

Next year, I’ll take a standard deduction on my federal income tax return. I’ve heard that I can get a tax break for my donations to charity even if I don’t itemize, as long as I use my required minimum distributions (or RMDs) from my IRA to make a qualified charitable distribution (or QCDs). Is that true?

Yes. In fact, taxpayers who itemize can also sometimes benefit from making qualified charitable donations.

The RMD amount that’s donated this way isn’t included in your taxable income. Therefore it doesn’t increase your adjusted gross income, which determines the size of Medicare premiums and the tax treatment of Social Security benefits.

The rules:

  • QCD donors must be at least 70½.
  • Your annual QCDs can’t exceed $100,000.
  • A QCD must go to a public charity, and it must be a check payable to the charity — not a check payable to you and endorsed to the charity. IRA custodians typically send the IRA owner QCD checks payable to charities he chose; he mails them to the charities.

An example: Let’s say your 2018 RMD is $5,000. You tell your IRA custodian you want to give a $3,000 qualified charitable donation to XYZ charity. (Ideally, charities should cash QCD checks by Dec. 31, so you should call the custodian to start the process by early December.)

The custodian sends you a check payable to XYZ Charity, and you send it to the charity. Of course, you must also withdraw the $2,000 RMD balance by the end of the year.

In 2019, you’ll get a 1099-R from the custodian showing you took your $5,000 2018 RMD. And on your 2019 federal tax return, you’ll report both a $5,000 gross IRA distribution and a $2,000 taxable distribution.

The bottom line

A qualified charitable donation satisfies your RMD requirement without increasing your taxable income.

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