Qualified Charitable Distributions

A Qualified Charitable Distribution sends money from a traditional IRA directly to charity. The amount is excluded from income and counts toward the account’s RMD. The owner must be 70 or older at the end of the year, FinZot’s whole-year stand-in for 70½. QCDs are the only charitable giving FinZot models directly. A gift from cash is an ordinary expense, and its deduction is entered as an itemized deduction. FinZot applies no income-based limit and no carryforward to an itemized deduction, so a large cash gift deducts in full in the years you enter it (income taxes).

How a QCD is sized

• Satisfy RMD. The account’s remaining RMD for the year. Zero before RMDs begin.
• To IRS Limit. The owner’s remaining annual QCD limit.
• Percentage of RMD. Zero before RMDs begin.
• A dollar amount, a percentage of the account balance, or a formula. A formula runs before the year has booked any income or spending, so it should read a balance: traditional_balance, or BALANCE() of the account. One that reads total_income, consumption, or another of the year’s totals gives $0 in every year. A percentage of income is not a QCD strategy.

The per-person annual limit accumulates down the list. Each entry uses part of it, leaving less for the entries below.

Where it runs in the year

QCDs are sized first in the year, before any income is collected and ahead of the RMD step, so a QCD reduces the RMD rather than adding to it. The sale itself runs at step 8, in list order (how a year works). The proceeds go to charity, so the year’s cash does not change and nothing is left to spend or invest. In a year when the owner has deferred their first RMD, a QCD satisfies no RMD; in the following year it counts against the deferred RMD first, then that year’s own (Roth conversions and withdrawals). An inherited account’s forced distribution counts as an RMD here at any age.