Qualified Charitable Distributions

Making a tax-free contribution from your IRA

Knowing the ins and outs of qualified charitable distributions (QCD) can ultimately save you time and money down the road. A QCD is generally a nontaxable distribution from your IRA account made to an organization eligible to receive tax deductible contributions. If you’re over the age of 70½, you may transfer up to $100,000 from your IRA to a charitable organization with­out having to include the income on your Form 1040. If you file a joint return, your spouse can also have a QCD and exclude up to $100,000.

Making this type of distribution allows you to report less income, which could help reduce the impact on taxable social security benefits. Here are a few additional things to keep in mind:
•    Any QCD in excess of the $100,000 exclusion limit is included in income as any other distribution.
•    The amount of the QCD is limited to the amount of the distribution that would otherwise be included in income.
•    If your IRA includes non­deductible contributions, the distribution is first considered to be paid out of otherwise taxable income.
 
A QCD will count towards your required minimum distribution; however, you cannot claim a charitable contribution deduction for any QCD not included in your income.
 
 
Quick Tips
 

1. The standard deduction remains at $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly. The standard deduction for heads of household rises to $9,300.
2. The limitation for claiming itemized deductions on 2016 individual returns begins with incomes of $259,400 or more ($311,300 for married filing jointly; $285,350 for heads of household; and $155,650 for married filing separately).
3. The personal exemption for tax year 2016 rises to $4,050, up from $4,000 for tax year 2015.
4. The annual exclusion for gifts remains at $14,000 for 2016.
5. For 2016, the maximum earned income credit is $506 for taxpayers with no children; $3,373 for taxpayers with one child; $5,572 for taxpayers with two children; and $6,269 for taxpayers with three or more children.
6. The standard mileage rate for medical and moving purposes decreased to 19¢ per mile for 2016.