As most people know, IRAs required minimum distributions (RMDs) start at age 70 ½. After many year-to-year extensions, Congress has made permanent a tax provision, which allows IRA owners subject to those RMDs to contribute up to $100,000 per year directly to charity rather than taking their RMD personally.
In making a Qualified Charitable Distribution (QCD), a person losses the deductibility of the donation, but avoids the donated amount being included in their Adjusted Gross Income, which would happen with the RMD. While this appears to be a "neutral" financial event, it can actually benefit certain taxpayers.
Reducing AGI can have a beneficial effect on higher income individuals by possibly reducing the 3.8% Medicare tax. If the taxpayer has high medical expenses, reducing AGI can increase the deductibility of medical expenses. Finally, the taxability of Social Security is based on AGI. Making a QCD would reduce AGI and may lower the amount of Social Security subject to tax.
The bottom line is that if you are subject to Required Minimum Distributions and you give money to your church or other charities, it would be wise to have us and your CPA look at Qualified Charitable Distributions.