For many retirees, Required Minimum Distributions (RMDs) can create an unwelcome tax burden. Once you reach a certain age, the IRS requires you to begin taking distributions from your traditional IRAs, and every dollar counts as taxable income.
A reliable strategy to reduce that burden while supporting the causes you care about is the Qualified Charitable Distribution, commonly called a QCD.
What Is a QCD?
A Qualified Charitable Distribution is a donation made directly from your IRA to a qualified charity. When done correctly, the amount you distribute counts toward your RMD for the year but is completely excluded from your taxable income.
It is one of the most effective ways for retirees to give charitably while reducing taxes.
Who Can Use a QCD?
To be eligible:
- You must be at least 70½ years old at the time of the distribution.
- The QCD must come from a traditional IRA (not a 401(k) or 403(b)).
- The donation must go to a qualified 501(c)(3) charity.
- Donor-advised funds and private foundations do not qualify.
How Much Can You Give?
You can give up to $108,000 per year (2025 limit) through QCDs.
Married couples filing jointly can each give up to the annual limit from their own IRAs.
Why QCDs Are So Valuable
- They reduce your taxable income
A QCD lowers your Adjusted Gross Income, reduces taxation of Social Security, may help avoid Medicare IRMAA surcharges, and can preserve deductions and credits.
You also do not need to itemize to receive the tax benefit.
- They count toward your RMD
If you have a Required Minimum Distribution, you can utilize a portion or all of it (up to the IRS limit) to give to charity.
Example: Linda is 75 and must take a $20,000 RMD this year. She wants to give $5,000 to her church. She directs $5,000 from her IRA directly to the church as a QCD. That amount satisfies part of her RMD and is not counted as taxable income. She only needs to withdraw the remaining $15,000, which appears on her return as ordinary income.
- They help prevent bracket creep
By keeping the donated amount off your tax return entirely, a QCD can help prevent your income from pushing you into a higher tax bracket.
Common Mistakes to Avoid
- Taking your RMD first and then attempting to make it a QCD
- Sending funds to donor-advised funds (not allowed)
- Making the gift before you actually turn 70½
- Failing to report the QCD on your tax return
QCDs offer a straightforward and highly effective way for retirees to lower taxable income while continuing to support the charitable organizations that matter most to them.
