A Qualified Charitable Distribution (QCD) permits annual direct transfers to a qualified charity totaling up to $100,000 of tax-deferred IRA savings. An owner cannot receive a distribution from the IRA to then contribute to charity and qualify. QCDs offer advantages over taking a taxable IRA distribution and then contributing the proceeds of that distribution to a charity. That’s because taxable IRA distributions must be included in adjusted gross income. This can cause:
Income taxes on Social Security benefits can increase,
Adjusted gross income (AGI) limitations on annual charitable deductions can defeat current deduction of the charitable contribution of IRA distribution proceeds (carryovers to a limited number of future tax years is available),
AGI limitations trimming itemized deductions can apply, and
Medicare insurance premiums can increase.
The bottom line is if you over 70 1/2 making charitable contributions and taking IRA distributions you should look at this as a tax reduction strategy.