Qualified Charitable Distributions (QCDs) Explained
Charitable retirees have a secret weapon to avoid tax on their RMD - called a QCD.
Giving in retirement
Giving in retirement requires A LOT of faith. No more paychecks. Fewer career opportunities ahead. It’s just you and your investments. Uncertainty is now your certainty. So, what’s the natural thing when you’re completely reliant on something out of your control? Give it away!
Of course, giving away your money is the opposite of what we’re inclined to do—our nature is to hoard rather than share. That’s why I admire those who step outside that instinct and open their hands in generosity.
With a high-five for your faith and generosity, let’s dive into three ways to save on taxes and give more to charity – a win-win.
Here’s a quick recap of what we’ve discussed so far:
In this week’s post, we’ll conclude the charitable giving series by talking about Qualified Charitable Distributions (QCDs). Let’s explore.
Qualified Charitable Distributions (QCDs)
Is that annoying deal you made with the government —your RMD—about to come due?
If so, don’t distribute it yet!
You may have a secret weapon that allows you to avoid paying taxes AND satisfy the RMD. It’s called the Qualified Charitable Distribution (QCD).
What is a QCD?
A QCD allows you to distribute from your traditional IRA directly to charity. By donating directly to charity, two major benefits occur.
1) You avoid taxes on the distribution.
2) It can count towards your RMD (Required Minimum Distribution).
To do a QCD, you must be at least 70 ½ or older and the amount must be less than $108,000/year (as of 2025).
A quick note: The QCD age was separated from the RMD age in 2020. This means you can make a QCD before you hit your RMD age.
Tax Benefits of QCDs
Let’s dive a little deeper into the tax benefits of a QCD.
First, when you distribute directly to charity, that amount is not counted as income on your tax return. This means your AGI will be lowered. And AGI counts towards your Social Security taxation. So, by donating directly to charity, you can reduce the amount of your Social Security that is taxed.
Second, many retirees don’t itemize their deductions as the standard deduction for most retirees is $33,100 (2025). So, if your donations total below that amount, there is no tax benefit.
But with a QCD, you DO receive tax benefit, no matter the donation size.
Here's a real-life example showing the impact this can have.
· Marital Status: Single Woman
· Age: 73
· RMD Amount: $30,000
· Charitable Gift Amount: $8,500
By using a QCD, our client in this example saves $2,567.
QCD Rules
With QCDs there are specific rules, so make sure you understand them or consult with a professional before proceeding.
1. Age Requirement: You must be at least 70½ years old to make a QCD from an IRA.
2. The donation must go directly to a qualified 501(c)(3) charity. Donor-Advised Funds (DAFs) and supporting organizations are not eligible for QCDs.
3. It must be done through an IRA (not a 401(k), 403(b), TSP, etc.)
4. You can donate up to $108,000 per year from your IRA to charity through QCDs (2025).
Important Note: Your year-end tax statement (Form 1099-R) does not indicate whether your distribution was a QCD. Be sure to inform your tax software or accountant so it's recorded correctly—otherwise, you could miss out on the tax benefits.
Should You Do a QCD?
Here is the ideal QCD candidate.
· Over 70 ½ years old
· Has the desire to donate
· Has an IRA balance
· Does not itemize deductions
· Is a high-income retiree who doesn’t need their full RMD
Conclusion
QCDs can be a great tool to use for charitable giving in retirement. By giving directly to charity, it’s as if that income didn’t exist, and it still counts toward your RMD—a win-win. But make sure you do it correctly and don’t forgo all its tax benefits.
Talk to your financial advisor or custodian about setting up a QCD. And lastly, if you are curious if your retirement investments are being made tax efficiently, click the link below to get your Tax-Smart Retirement Score!
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