Giving from your IRA in 2024

First, let’s define a few terms:

  • Qualified charitable distribution (QCD) – A QCD is a distribution from a traditional IRA (not a Roth IRA) which is paid directly to the qualified charity (like Holy Family) after the IRA owner turns 70½.

    In 2024, an IRA owner can make QCDs of up to $105,000 annually. This is an increase over the amount allowed in prior years.

    If your distribution counts as a QCD, the amount is not reported as taxable income on your tax return. Amounts that exceed $105,000 or don’t fit the QCD rules are typically treated as regular distributions.

    A QCD is also sometimes referred to as an IRA charitable rollover.

    Funds distributed directly to you (the IRA owner) and which you then give to charity do not qualify as a QCD.

  • Required minimum distribution (RMD) – An IRA owner who is 73 or older is required to distribute a certain portion of his or her IRA every year. This is known as your RMD.

    You can satisfy this requirement by taking regular distributions from your IRA, making QCDs, or doing both.

  • Adjusted gross income (AGI) – A lot of numbers go into figuring AGI, but, big picture, think of it as your income before you take your standard or itemized deduction (including the charitable deduction) and qualified business income deduction. 

    You can find yours on the first page of your IRS Form 1040; it’s in bold letters toward the bottom.

  • Regular distribution – This is simply a withdrawal from an IRA after the owner turns 59½. A regular distribution is generally made to you, and it is reported as income on your tax return.

Your Options by Age

Think of your IRA on an age-based timeline.

If you distribute assets before the age of 59½, you are making an early withdrawal and will likely pay both the income tax and a 10% penalty.

As you move through the ages, regular distributions and QCDs become available to you, and eventually RMDs become a requirement.

But for those who have not yet turned 59½, there are likely better options to explore for your giving.

Age 59½ or older

At this age, you may make a regular distribution from an IRA without an early withdrawal penalty. You will still be required to report this as income, but you may offset some or all of the federal income tax by making a deductible gift to charity in the same year. This option is available every year.

In 2024, the charitable deduction for cash gifts to public charities and churches is limited to 60 percent of your AGI, so a charitable gift may not offset all of the federal income tax associated with a regular IRA distribution unless you have sufficient non-IRA income that increases your AGI.

Note that this will change. The 2017 Tax Act increased the charitable deductions made in cash from 50% to 60% of an individual’s adjusted gross income (AGI.) This is a temporary rule change which is set to drop back to 50% beginning in 2026.

Note: You can carry any unused charitable deduction forward for five years under the normal rules for charitable deductions, and this is true every year.

Age 70½ or older

If you are 70½ or older, you might consider making a QCD from your IRA directly to charity, rather than using a regular distribution (to yourself) followed by a charitable gift.

A QCD can be a cash gift to the charity. It can also fund a charitable gift annuity (CGA). A QCD lets you give to a charity without having to include the distribution in your AGI. 

QCDs are limited to $105,000 per year. But you can make a one-time election to use $53,000 of your QCD to fund a CGA that will make regular payments to you and/or your spouse for your lifetimes. 

Like all CGAs, when funding with a QCD, the charitable gift annuity must be structured to ensure there will be a charitable remainder - meaning some portion of the original gift amount must be expected to remain for the charity after all lifetime payments to the beneficiaries have ended.

A QCD may be an excellent choice for the first $105,000 of your charitable giving.

Age 73 or older

At age 73, every IRA owner must begin taking an RMD if they haven’t started already. They can be regular distributions, QCDs, or both.

For example, if your RMD is $50,000, you can satisfy this by making a QCD of $30,000 directly to a charity and taking a regular distribution to yourself of $20,000.