A feature of a Traditional IRA is that once you reach age 72 (if your 70th birthday is July 1, 2019 or later with the new SECURE Act rule) you are required to take an RMD (Required Minimum Distribution) each year. If you don’t need the RMD funds for living expenses, the RMD is simply increasing your taxable income, which is increasing your taxes. A strategy that would help you reduce your taxable income is to designate your RMD to a charity. This is an excellent strategy for those that are already donating to a charity, but also have to take a required minimum distribution from an IRA.
The IRS has some requirements that, if followed, allow you to count the charitable donation as your RMD and the amount will be excluded from your taxable income. They call this a Qualified Charitable Distribution (QCD) and the main requirement is that the RMD go directly to the charity and does not come to you first, so you will want to talk to your IRA custodian before receiving your RMD. Just don’t try to also claim the QCD as a charitable tax deduction. The IRS will frown on that. Talk to your Tax Advisor to see if this strategy is right for you.