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RMD used to purchase a QCD annuity.

By Terry Savage on August 21, 2016 | Financial Planning / Retirement

Dear Terry, Next year I and my wife will begin taking required minimum distributions from our traditional IRAs. Can we avoid paying taxes on the distribution by directing the the funds directly to a charity, say to a university, to purchase an annuity from the charity? May the amount we redistribute also be claimed as a charitable itemized deduction? We assume the payments we will subsequently receive from the annuity will be added to our total income when we compute our taxes. Norm

Terry Says

You're talking about a tax program called an IRA qualified charitable deduction, which was made permanent in December 2015.  It allows individuals age 70-1/2 to make contributions from their IRA DIRECTLY to a qualified charity, and have that amount considered as part of their RMD.  However, there is a cap of $100,000 per year per person on this provision.  You do not have to limit yourself to one charity.  Multiple direct contributions can be made. You get to exclude the amount contributed from your income that year (otherwise, your entire RMD would be considered ordinary income) BUT, you do not get a charitable tax deduction for the amount contributed.  That would be a double break for you, and the government isn't that generous!

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