When using the QCD strategy, the donor does not receive a deduction for the charitable donation. Instead, the QCD amount is excluded from taxable income.

The QCD strategy shifts the tax benefit upstream from the tax return, allowing additional benefits beyond a standard charitable deduction.

QCDs can be particularly beneficial for taxpayers who do not itemize deductions, as they may not receive a tax benefit for a charitable donation if they do not use the QCD strategy.

Even if you itemize the deductions, the QCD strategy can offer additional tax benefits. Since an IRA distribution made through a QCD is excluded from income, this strategy could potentially reduce income that affects Medicare surtax, Medicare surtaxes, and Social Security taxation.

To be considered a QCD, the charitable donation must be made directly from the IRA’s custodian or trustee to a qualifying charity. Private foundations and donor

– the advised funds are not considered as QCD beneficiaries.

Most IRAs are eligible for QCDs; however, not all tax-deferred employer plans are eligible. If you are still contributing to your IRA, your ability to perform a QCD may be affected. Be sure to communicate all QCDs to your CPA to ensure proper tax reporting for distributions.