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(how to pay fewer taxes while supporting your favorite charity and complying with IRA distribution requirements)

Presented by Nancy J. LaPointe* MBA, CFP®, ChFC®, CLU®, CASL®

Older IRA owners may make tax-free donations (also known as 'charitable IRA rollovers') from an IRA directly to a qualified organization and may exclude up to $100,000 annually from gross income. These gifts would otherwise be taxable IRA distributions. This tax provision was made permanent by the Protecting Americans from Tax Hikes (PATH) Act of 2015.

How QCDs work

If you are 70½ or older, you are eligible to make QCDs. Direct your IRA trustee to make a distribution directly from your IRA to the qualified charity of your choice. (Please note that SEP and SIMPLE IRAS do not qualify.) The distribution must be one that would otherwise be taxable to you. In many cases, both you and your spouse may exclude $100,000 of QCDs each from your gross income each year. Note: No double-dipping, you cannot deduct QCDs as a charitable contribution on federal income tax returns.

QCDs are considered part of your required minimum distributions (RMDs) and count toward your required annual distributions. However, the charitable distributions must occur directly from the IRA to the organization. Any funds received from the IRA by you, and subsequently donated to a charity -cannot qualify as QCDs and do not qualify for the tax benefit.

Bottom Line:

QCDs (Qualified Charitable Donations) can avoid cumbersome tax deductions for charitable gifts, while providing exclusions from income for charitable donations made directly from IRA distributions. You don't take a deduction for the QCD, and you don't report the IRA distribution in your gross income. And all the while, your favorite charity benefits! Your tax preparer can help assure your transaction is properly recognized.

*Nancy J. LaPointe is a financial advisor located at Navigate Financial, 3663 College St. SE, Suite B, Lacey, WA 98503. She offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. She can be reached at 360-625-8175 or at