If you’re 70½ or older and have a traditional IRA, you have a powerful opportunity to support charitable causes while reducing your tax burden. It’s called a Qualified Charitable Distribution (QCD), and it allows you to donate money directly from your IRA to a qualified charity, all while avoiding income taxes on the amount donated. This strategy is especially helpful for retirees who must take Required Minimum Distributions (RMDs) each year but don’t necessarily need the income those withdrawals provide.

What Is a Required Minimum Distribution?

An RMD is the minimum amount the IRS requires you to withdraw each year from certain retirement accounts, including traditional IRAs, once you reach a specific age, currently 73 for most people in 2025. Normally, these withdrawals are considered taxable income. But a QCD allows you to satisfy all or part of your RMD by transferring funds directly to a charity, and the best part is that the amount donated doesn’t count as taxable income.

What Is a Qualified Charitable Distribution?

A QCD allows you to transfer funds directly from your IRA to a qualified charitable organization. If done properly, the QCD amount can count toward your RMD for the year. You don’t need to file Schedule A itemize deductions to claim the deduction  or pay income tax on the amount donated. A special benefit is that, unlike a regular charitable contribution, a QCD reduces your adjusted gross income (AGI), which can positively affect your tax brackets and Medicare premiums. Married couples with separate IRAs can each donate up to the limit below. However, the funds cannot go to donor-advised funds or private foundations, which are excluded from this benefit.

To be eligible:

• You must be at least 70½ years old at the time of the distribution.
• The funds must come from a traditional IRA (not 401(k), 403(b), or other retirement plans).
• You can donate up to $108,000 per year (for 2025 – 2026 amount will be indexed for inflation).
• The charity must be a qualified 501(c)(3) organization (not a donor-advised fund or private foundation).

Making a QCD?

Making a QCD is fairly straightforward, but it’s important to follow the process carefully. You’ll need to contact your IRA custodian and instruct them to send a check directly to the charity of your choice. Make sure the check is made payable to the organization and include identifying details (like your name and address) so the charity can acknowledge the gift. While your IRA custodian will issue a Form 1099-R reporting the distribution, it won’t specifically label it as a QCD, so you’ll need to track this yourself. When filing your tax return, report the full amount of the IRA distribution on line 4a of IRS Form 1040, then report only the taxable portion (which may be $0 if the entire amount was a QCD) on line 4b, writing “QCD” next to it.

Additional Tax Benefits

It’s worth noting that QCDs reduce your adjusted gross income (AGI), which can have additional tax benefits. Lowering your AGI may help you avoid the Medicare income-related monthly adjustment amount (IRMAA), reduce taxation on Social Security benefits, and possibly qualify you for other deductions or credits that phase out at higher income levels. Unlike regular charitable deductions, which require you to itemize to claim, a QCD provides a tax benefit even if you take the standard deduction.

Thanks to recent updates under the SECURE 2.0 Act, starting in 2023, retirees are also allowed to make a one-time QCD of up to $53,000 to certain charitable gift annuities or charitable remainder trusts. This option adds flexibility for those who want to support charity and also receive some income in return.

Contact Us Today

Qualified Charitable Distributions offer a smart way to meet your charitable goals while managing your tax obligations. Call us at 203-489-0612 to learn how a QCD can fit into your overall financial and tax strategy.

Written by: Roisin McGuirk