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A question for those over 70½-years of age: How can you help a charity, satisfy some of your required minimum distributions (RMDs) from retirement accounts, and possibly get a tax benefit? The answer is a qualified charitable distribution (QCD).
A QCD lets those who are 70½ years of age or older donate up to $111,000 annually (indexed for inflation) from their traditional individual retirement account (IRA) to a qualified charity in order to satisfy eventual federal RMD requirements.
Beyond altruism, this strategy may also reduce your overall taxes.
“QCDs are a powerful tool for people who are charitably inclined, especially those making reoccurring annual contributions, such as tithes,” said John H. Haslam III, a financial professional with Palmetto Financial Group in Savannah, Georgia.
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How QCDs and RMDs work together
Once you turn 73, you must begin taking RMDs from your tax-deferred retirement accounts, like an IRA. That’s because the federal government needs to start making up for the lost revenue on that retirement money while it was growing in a tax-deferred account.
Distributions from tax-deferred accounts are taxed at your ordinary income tax rate, up to 37 percent for the highest income households in 2026. And missing an RMD can result in additional tax.
But some people don’t need that retirement income, and so they don’t want to take the RMD (or pay the taxes on it). Indeed, the age for the RMD requirement was pushed back by recent legislation and will be pushed back further in the years ahead. (Related: Retirement rule changes)
The amount of your RMD is determined by your projected life expectancy and, notably, the total amount of money in your qualified retirement accounts on December 31 of the prior year. Reducing that total, then, will reduce the total amount subject to RMDs. And that’s where the QCD comes in — the money used for the charitable donation is counted toward your RMD for the year.
Note that you can make a charitable contribution using your qualified retirement funds that exceeds your RMD, but the QCD itself cannot exceed $111,000 (indexed for inflation in future tax years).
If you are still making contributions to your IRAs, the QCDs will need to be coordinated with those contributions. And, as a result, some QCD transfers may be reduced by the total of any IRA contribution you make after age 70½ that did not reduce a QCD previously.
For example, if you contribute $7,000 to a traditional IRA when you are 72 and attempt a QCD of $30,000 at age 75, the amount treated as a QCD will be reduced to $23,000. The $7,000 of the transfer that is not a QCD will be treated as a distribution to you followed by a charitable contribution. You may claim this as an itemized charitable contribution, subject to the charitable deduction limits.
Is it worth it to make a QCD contribution before 73? Sometimes it is because it lowers your future IRA balance, reduces later RMDs, and lets you give pre-tax money starting at age 70½, even though RMDs do not start until 73.
Tax benefits of a qualified charitable distribution
You can make a QCD from your IRA while still claiming the maximum available standard deduction from your federal income taxes. That’s significant because more taxpayers are opting not to itemize their taxes, owing to tax law changes restricting potential deductions.
The standard deduction in 2026 for a married couple, both over the age of 65, is $35,500.1 For single individuals over 65 the amount is $18,150. If your other itemized deductions — such as the allowable portion of medical expenses, state and local taxes, and mortgage interest payments — are less than the standard deduction, you will reduce taxes by making charitable contributions out of your retirement account.
“QCDs provide individuals with a unique opportunity to mitigate tax liability,” said Haslam. “In many instances, the QCD provides people with a greater income tax savings compared with claiming a tax deduction on a cash gift, especially if they only use the standard deduction. Additionally, there are potential savings on Medicare premiums and supplements by lowering taxable income.”
Other benefits to consider:
- Your overall Adjusted Gross Income (AGI) affects whether your Social Security is taxable, whether the investment surtax applies, and other aspects of your overall income tax return. Using a QCD may enable you to minimize your overall tax liability.
- For individuals with high medical expenses who are able to itemize deductions, allowable medical deductions are reduced by a percentage of AGI. Utilizing a QCD may enable you to deduct a larger portion of your medical expenses.
You should discuss the full ramifications of using a QCD with your financial professional or tax advisor.
How to set up a QCD
To put a QCD into place, you simply contact your IRA custodian to obtain the appropriate form. The IRA custodian must pay the distribution directly to the charity.2
You can establish a QCD after you attain age 70½, even if you do not have to start RMDs until the year you reach age 73.
Distributions from qualified plans — such as 401(k)s, pension plans, and 403(b)s — do not qualify for QCD treatment. QCDs cannot be made to donor-advised funds and certain other charities.
Conclusion
Qualified charitable distributions can be an effective way to use distributions, including RMDs, from IRAs to benefit charities and potentially reduce your income taxes.
“We encourage clients to stop writing checks and use QCDs,” noted Haslam. “To date, our firm has processed hundreds of qualified charitable distributions to dozens of charities. … This planning strategy deepens our relationship with clients and the charitable organizations that mean the most to them.”
Frequently Asked Questions about QCDs
Q. At what age can I make a qualified charitable distribution?
A. You can begin making QCDs from your IRA as soon as you reach age 70½. This allows you to utilize this tax-efficient charitable giving strategy even before you are required to take minimum distributions at age 73.
Q. Does a QCD count toward my standard deduction?
A. A QCD is excluded from your taxable income entirely, meaning you receive the tax benefit even if you claim the standard deduction rather than itemizing. This makes it a powerful tool for retirees looking to manage their tax liability while supporting charitable causes.
How does a QCD affect my RMD?
A. The amount you donate through a QCD counts toward your required minimum distribution for the year. This allows you to satisfy your IRS requirements without adding to your adjusted gross income.
Discover more from MassMutual …
Retirement needs vs. RMD rules — and the QLAC
Why you need this Social Security report
Annuity criticisms and rebuttals
This article was originally published in April 2023. It has been updated.
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1 Indexed for inflation.
2 You will receive a Form 1099-R from the IRA custodian reporting the distribution as taxable and must report it on your tax return, though it is not included in computing your adjusted gross income.
