Does your client have a philanthropic spirit? A generous, charitable impact might be more attainable than your client thinks. Clients who receive Required Minimum Distributions (RMD), but don’t need the extra income might value the Qualified Charitable Distributions (QCD) option. It allows for reducing taxable income while supporting charitable causes—an appealing option for many retirees.

QCDs allow retirees to support charities directly from their retirement savings without increasing their adjusted gross income. This strategy can be beneficial for tax planning and philanthropic goals. Recommend to your members that they use this strategy for both their current giving and future charitable planning.

Keep in mind that RMDs, or mandatory withdrawals from retirement accounts such as IRAs and 401(k)s, are required starting at age 73 for most people as of 2023. RMDs are generally subject to ordinary income tax, and there could be a substantial IRS penalty if the RMD is not taken. Using a QCD to satisfy the RMD can be a valuable strategy.

Important information about QCDs

• It is a direct transfer of funds from an Individual Retirement Account (IRA) to a qualified charity.
• QCDs can be made by IRA owners who are age 70½ or older.
• The maximum annual QCD is $108,000 per individual.
• They count toward satisfying the RMD for the year.
• QCD amounts are excluded from taxable income, which canlower tax liability.
• Distributions must be made to IRS-qualified charities; donor-advised funds and private foundations do not qualify.