When you reach age 73, you’ll have to start taking required minimum distributions (RMDs) from your traditional IRAs.
If you have a lot of money in your IRAs, RMDs can be a real tax headache.
RMDs are taxable income, so they increase your adjusted gross income and bump you into a higher tax bracket. They also can increase the federal income tax on your Social Security benefits and cause higher Medicare premiums.
But if you’re charitably inclined, you can use a qualified charitable distribution (QCD) to give a charity the money and eliminate any taxes on your RMD.
The Magic of the QCD
QCDs can kill many birds with one stone. A QCD:
- Satisfies RMD requirements. The QCD counts toward your required minimum distribution(RMD). At age 73 and older, you must take RMDs from your traditional IRAs, and QCDs can satisfy this requirement.
- Excludes distributions from tax. QCDs are excluded from your taxable income, unlike regular IRA distributions that would typically count as income. This means you don’t pay income tax on the distributed amount (up to $108,000 in 2025).
- Lowers adjusted gross income (AGI). By reducing your taxable income, QCDs can
- lower your Medicare premiums (which are income-based);
- reduce the taxation of your Social Security benefits;
- keep you in a lower tax bracket; and
- minimize exposure to the net investment income tax.
- Counts as charitable giving without itemizing. You get the tax benefit of charitable giving even if you take the standard deduction rather than itemizing deductions.
- Provides estate planning benefits. QCDs can reduce your taxable estate while supporting causes that are important to you.
Example: How Arthur Beat the Tax System with a QCD
Arthur and Bea Smith, both 75-year-old retirees with a comfortable $117,000 annual retirement income, face the annual IRA RMD dilemma. Arthur must withdraw $25,000 this year—money that would normally get taxed as ordinary income.
When Arthur’s church announced a capital campaign for a new roof, he wanted to contribute $5,000. Being financially savvy, Arthur recognized a golden opportunity.
The Smart Move
Instead of taking his full $25,000 RMD and then writing a check to his church, Arthur contacted his IRA custodian and directed them to send $5,000 directly to his church as a QCD. Later that year, he withdrew the remaining $20,000 to complete his RMD requirement.
Three Impressive Results
- Arthur fully satisfied his $25,000 RMD obligation.
- The $5,000 QCD to the church reduced his RMD taxable income to $20,000 – giving him a $ 5,000 deduction.
- Arthur and Bea got to sort of double-dip by maintaining their standard deduction and also realizing a $5,000 QCD deduction.
The Financial Impact
If Arthur had withdrawn the full $25,000 and then donated $5,000 to his church, that $5,000 would have been fully taxable because the Smiths don’t itemize deductions. At their tax bracket, this smart QCD strategy saved them approximately $1,100 in federal taxes.
Arthur effectively supported his church while legally reducing his tax burden—a true win-win scenario that any savvy retiree should consider.
QCDs are a great tax strategy. But there are a number of rules you need to follow for your QCD to work as intended.
Age Requirement
Although RMDs aren’t required until the year you turn 73, you can start making QCDs the day after you turn 701/2—that is, six months and one day after your 70th birthday. If you make your QCD one day early, it won’t count as a QCD and will be taxable income to you.
If you’re charitably inclined, QCDs before age 73 are absolutely worth doing even though you don’t have to do an RMD for the year.
Eligible Accounts
Most QCDs are made from traditional IRAs, including inherited IRAs (but the beneficiary-owner of an inherited IRA must be age 70 1/2 or older). They may also be made from SEP-IRAs and SIMPLE plans, provided no contributions were made to the account for the year.
QCDs may not be made from 401(k), 457(b), 403(b), or other employer plans. But you can roll over money from such plans to your traditional IRA and then make a QCD from the IRA.
You can also make a QCD from a Roth IRA, but there is no reason to do so since withdrawals are tax-free unless you don’t have a Roth that is at least five years old. (RMDs are not required for Roth IRAs.)
If you have multiple IRAs, you can make QCDs from all or some of them, but the total amount of your QCDs cannot exceed the annual limit.
Maximum QCD Amount
For 2025, the maximum QCD amount is $108,000 (it is adjusted for inflation each year). If you’re married, you file jointly, and you and your spouse are both over age 70 1/2, you can each take a $108,000 QCD from your own IRA, for a total of up to $216,000.
If your RMD for the year is less than the $108,000 annual limit, you can still give up to $108,000 and the full amount is excluded from your income.
If you make a deductible IRA contribution in the year you turn 70 1/2 or any later year, your QCD exclusion amount is reduced by the amount of your IRA deduction.
If you don’t do a QCD that year, the reduction applies to any future year you do a QCD. For this reason, you shouldn’t make deductible IRA contributions after age 70 1/2 if you also want to do QCDs.
QCDs Must Be Paid to 501(c)(3) Organizations
The QCD must be paid to a Section 501(c)(3) charitable organization. These are what we ordinarily think of as charities: churches, educational institutions, non-profits that aid the poor, and the like.
You can contribute to as many charities as you want and make multiple QCDs during the year.
You cannot pay your QCD to a donor-advised fund or private foundation.
Your QCD must be paid directly to the charity. Typically, your IRA trustee will submit your QCD to the charity or charities you designate. Distributions made by check payable to the charity can be delivered to you, and you can then deliver the check to the charity.
Your distribution must be completed by December 31 to be considered a QCD for the year. Thus, if you pay a charity by check, the charity must cash the check by December 31. The moral: don’t wait until the last minute to make your QCD.
No Benefit Rule
You must not receive any goods or services from the charity, such as a dinner or membership, in return for your QCD. If you do, the entire QCD is disallowed—it will all count as taxable income.
Acknowledgment from the Charity
You must obtain a written acknowledgment from the charity that it received your QCD, which should include a statement that you received no goods or services from the charity.
The acknowledgment is supposed to be contemporaneous—at the latest, you should receive it when you file your return or when your return is due including extensions, whichever is earlier.
No Double-Dipping
If you make a QCD, you cannot also deduct the amount of the distribution as a charitable contribution.
One-Time QCD to a Charitable Gift Annuity, CRUT, or CRAT
Instead of a regular QCD to a charity, you can do a one-time QCD to a charitable remainder annuity trust(CRAT), charitable remainder unitrust (CRUT), or charitable gift annuity. The maximum amount of such a one-time QCD is $54,000.
Given the $54,000 lifetime limit, using QCDs for CRATs and CRUTs is not really worthwhile because they are too expensive to establish and administer. But charitable gift annuities are a viable option.
A charitable gift annuity is a contract between you and a charity in which you make a gift of the QCD funds to the charity and the charity pays you a fixed amount of monthly income until death. Only you and/or your spouse can receive the income.
There is a 5 percent minimum payout for such annuities, and the payments are taxed as ordinary income. This can be a good way, for example, to make a fairly substantial gift to your alma mater.
Timing of QCD
The timing of your QCD to offset your RMD can get tricky if you make multiple distributions from your IRAs.Under the tax code’s “first dollars out” rule, the first distribution you take from your IRA is deemed to go towards satisfying your RMD for the year. This continues with subsequent distributions until the RMD is completely satisfied.
Example. Betty’s RMD for her traditional IRA is $10,000. In January, she has her trustee distribute $6,000 from the IRA to her taxable brokerage account that she uses for personal expenses. This is her first distribution from her IRA for the year; thus, it goes toward her RMD. It is also taxable income.
Later in the year, Betty donates $10,000 as a QCD to a qualified charity. Since $6,000 of her RMD has already been satisfied, only $4,000 of the QCD counts toward her RMD. The full $10,000 QCD is tax-free, but Betty still has $6,000 of taxable income.
Key Point. If your goal is to fully offset your RMD with a QCD, be sure to complete the QCD before taking any other distributions. If you plan to take funds in excess of your QCD/RMD, the order of distributions won’t affect your total taxable income, as is the case for Betty.
Recommendation. Always deploy your QCDs first. Always track your RMDs.
QCDs Reported as Regular Distributions
Despite the fact that a QCD is non-taxable, the IRA custodian must report it as a taxable distribution on IRS Form 1099-R. You are responsible for reporting the QCD as a non-taxable distribution on your return. To do this, you
enter your total IRA distributions on Form 1040, line 4a: IRA distributions;
enter the taxable amount on line 4b: Taxable amount—if the total amount is not taxable, enter0; and
write “QCD” next to line 4b.
Be sure to let your tax preparer know about your QCD. There is no separate code on Form 1099-R for QCDs,so the only way your preparer will know you made one is if you tell him or her.
Takeaways
Here are five takeaways from this article:
- Taxpayers must take annual required minimum distributions from their traditional IRAs when they reach age 73. RMDs are taxable income, but you can avoid all or part of the tax due by making a QCD. The distribution is tax-free and counts as all or part of your RMD for the yeareven though the charity, not you, receives the distribution.
- A QCD must be made to a Section 501(c)(3) charitable organization. You cannot pay your QCD to a donor-advised fund or private foundation. You must get a written acknowledgment from the charity and receive nothing of value in return for the QCD.
- QCDs may be taken from traditional IRAs, SEP-IRAs, and SIMPLE plans, provided no contributions were made to the account for the year. QCDs may not be made from 401(k),457(b), 403(b), or other employer plans.
- A 2025 QCD may not exceed $108,000. Spouses may each make a $108,000 QCD from their own IRA for a total of $216,000.
For a QCD to count toward your RMD, it must be the first distribution you make from your IRA for the year.
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