If you are a retiree who wants to support a good cause, you might be interested in a tax-smart way to donate to charity from your IRA. It’s called a Qualified Charitable Distribution (QCD), and it can help you lower your taxable income, satisfy your Required Minimum Distribution (RMD), and benefit your favorite charity at the same time.

A QCD is a direct transfer of funds from your IRA to a qualified charity. You can donate up to $105,000 per year (starting in 2024) as a QCD, and the amount will not be included in your taxable income. This means you can still take the standard deduction and enjoy the tax benefits of charitable giving. Plus, the QCD will count toward your RMD for the year, reducing the taxes you would otherwise owe on that distribution.

To qualify for a QCD, you must meet the following criteria:

• You must be at least 70 1/2 years old when you make the QCD.
• You must have a traditional IRA or a rollover IRA. You cannot use a 401(k), SEP-IRA, or SIMPLE IRA for a QCD.
• You must send the QCD directly to the charity. You cannot receive the money yourself or use it for any personal benefit.
• You must donate to a 501©(3) organization that is eligible to receive tax-deductible contributions. You cannot use a QCD for a Donor Advised Fund, a private foundation, or a charitable trust.

To report a QCD on your tax return, you must list the full amount of the QCD on the line for IRA distributions, but enter zero for the taxable amount. You must also write “QCD” next to the line to indicate that it is not taxable.

A QCD is a great way to support a cause you care about while reducing your tax bill and fulfilling your RMD obligation. It is especially useful for retirees who do not itemize their deductions or who want to use pre-tax dollars for their charitable donations. If you are interested in making a QCD, you should consult with your IRA custodian and your tax advisor to make sure you follow the rules and document the transaction properly.