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MOST Ministries
Tax & Other Advantages: Making "Qualified Charitable Distributions" 
By Greg Gessert (MOST Ministries Board Member)

As you may know, if you are over 70 ½ years old and own so-called “qualified” or tax advantaged retirement accounts (e.g., SEP, 401K, 403B, 457B, traditional IRA), you are required to withdraw a portion from those accounts each year. In general, the amount that must be withdrawn, called the “required minimum distribution” or RMD, is taxable if it is deposited into a regular money market, checking or savings account, or simply withdrawn and spent. When the RMD amount enters a taxable account or is spent, it must be included in the taxpayer’s “adjusted gross income” (AGI) and becomes subject to the federal income tax in that year.


As a 70+ year old senior, myself, I was pleased when the federal government announced last year that Social Security recipients would receive an increase in their payments for 2019 because of a higher 2018 national cost of living. But when my Social Security check arrived in January, it was significantly less (approximately $500 annually) than the monthly amount I had received previously. Ouch!  How did that happen?


In my situation, when I deposited my RMD into my checking account before making donations to my church and MOST Ministries, it also increased my AGI which resulted in an increase in my annual Medicare payment. However, if all or a portion of my RMD had been sent directly from a retirement account to the eligible charities, it would not have been included in my AGI. This type of direct transfer is called a Qualified Charitable Distribution or QCD. A QCD is counted against my required minimum distribution but it is not included in my AGI or in the Medicare payment calculation. If I had made a QCD last year my 2019 Social Security income would have increased and my Medicare payment level would probably have remained at the previous lower level.


The bottom line is that a QCD is a legal and relatively easy means for charity minded seniors to support their favorite 501(c)(3) charities -- thereby avoiding the negative aspects of increasing their federally taxable adjusted gross income. Another advantage of the QCD is that it can be used to support charities without itemizing the donation on your annual federal tax return. As you may know, the 2017 federal tax law doubled the individual deduction and, as a result, many tax payers who formerly itemized their tax deductions, and received deductions for donations to charities, no longer have to do so. Using QCDs, you reduce your AGI dollar for dollar which reduces your income tax, your favorite charities get their donation, and you don’t have to itemize the donation on your income tax return – a win-win-win!


Note: 2020 Social Security benefits are scheduled to increase 1.6 percent.


For more information on QCDs, check with your tax preparer or other reputable sources, such as:




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