Important Information every Senior IRA owner needs to know

On December 18, 2015 a law was signed making permanent the ability to contribute directly to your favored charity from your individual retirement account if you are 70½.  This provision has been available since 2006, but it was always passed late in the year, and seniors had no opportunity to confidently plan in advance.

Now that the law is permanent, seniors can use this useful strategy when preparing for yearend tax and income issues, including receiving their Required Minimum Distribution (RMD). 

The law is relatively simple.  The owner of an IRA who is at least 70½ may make a donation up to $100,000 ‘from their IRA directly to a qualified charity’ without it adding to their taxable income.  This is called a Qualified Charitable Distribution (QCD). 

The key aspect of this provision is that the transfer must be from the IRA administrator directly to the qualified charity and NOT to the individual himself.  This distribution can even apply toward the individual’s required minimum distribution (RMD) for the year.  This is a real advantage for an IRA owner who does not need the RMD to live on.

A distribution from an IRA to an individual increases one’s adjusted gross income (AGI), even if that person subsequently makes a contribution of the distribution that was received.  As a result, an individual who takes a distribution and then makes a donation with those funds loses some advantages that one would have with a QCD.  Specifically:

  • Income taxes on social security benefits can increase
  • Medicare insurance premiums can increase
  • There are also possible AGI limitations on annual charitable deductions that could            apply (your tax adviser can help with this item).

To take advantage of a QCD, simply contact the administrator of your personal IRA.  Advise them of the amount you would like to transfer as well as the name and address of your preferred recipient charityMake sure they understand the distribution must go directly to the charity and not to you, the owner


Be sure to contact the charity to confirm they are a qualified charity and to advise them that the distribution will be coming.  They should send you a letter confirming the receipt from your administrator, but it will not indicate you have made a charitable contribution.  This transfer will not be a charitable contribution for you.