Giving Tuesday: How Retirees Can Achieve Tax Benefits Through Their Charitable Giving

Shot of a senior couple going through their paperwork together at home.
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Following the retail extravaganza of Black Friday and Cyber Monday comes Giving Tuesday. Retirees inclined to participate by donating to charity on this “holiday” should be mindful of ways their gifts can qualify them for a tax break.

Those who are 70½ or older should consider donating directly from their traditional IRA account. This method, known as a “qualified charitable distribution,” or QCD, entails a direct transfer from an IRA to an eligible charity.

IRA participants can donate up to $100,000 per year ($200,000 for married couples if each individual holds an IRA account).

A QCD qualifies you for a tax break even if you don’t itemize deductions — as fewer Americans do since the standard deduction was raised in 2018 — because the transfer doesn’t show up on your return as income.

The greatest benefit of the QCD for most retired taxpayers is that it reduces adjusted gross income. This is advantageous because higher adjusted gross income typically amounts to a higher tax bill.

Note that if you’re 72 years old, a QCD transfer may count as your required minimum distribution, or RMD. Anyone aged 70½ (or 72 for those born after June 30, 1949) before December 31 must withdraw their RMD from their IRA. If one doesn’t need the cash, they may want to consider a QCD for the tax benefits alone. And of course, charitable giving is a nice thing to do more broadly.

Are You Retirement Ready?

You can find eligible (and reputable) charities by consulting Charity Navigator.

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