Quick overview

Qualified Charitable Distributions (QCDs) let IRA owners move money directly from an IRA to an eligible charity and exclude the transferred amount from taxable income. The QCD is a widely used strategy to reduce adjusted gross income (AGI), satisfy required minimum distributions (RMDs), and support charitable causes without claiming an itemized deduction. The most important basics: you must be age 70½ or older at the time of the distribution, the gift must go directly from the IRA custodian to a qualifying public charity, and the annual cap is $100,000 per individual (no carryover).

(Official IRS guidance on QCDs is available from the IRS — see Retirement Topics: Qualified Charitable Distributions.)

Who qualifies and which accounts are eligible?

  • Age requirement: You must be age 70½ or older at the time the distribution is made to qualify as a QCD. Note that this age requirement remains 70½ even though RMD starting ages have changed under more recent law (SECURE Act 2.0). (IRS guidance.)
  • Account types: QCDs generally come from traditional IRAs and may be made from Roth IRAs. In practice, QCDs are most useful from traditional IRAs because those distributions are normally taxable, whereas Roth IRA distributions are typically tax-free during the owner’s lifetime.
  • Not eligible: Employer-sponsored plans (401(k), 403(b), etc.) do not permit QCDs unless you first roll funds into an IRA and then make the QCD. Gifts to donor-advised funds (DAFs), supporting organizations, and private foundations are not eligible for QCD treatment.

How QCDs interact with RMDs and timing

  • Counts toward RMDs: A QCD made in a calendar year counts toward that year’s RMDs. If you have multiple IRAs, you may aggregate RMDs and use QCDs from any IRA to satisfy the total RMD requirement.
  • Deadline: The transfer must be completed (paid to the charity) by December 31 to count for that tax year.
  • First-year RMDs: If you delay your first RMD to April 1 of the next year, be mindful that a QCD made in the same calendar year can only count for that year’s RMDs. Work with your advisor to coordinate timing.

For a refresher on RMD rules and timing, see FinHelp’s overview: “Required Minimum Distribution (RMD)”.

Dollar limits and tax effect

  • Annual limit: You can exclude up to $100,000 of QCDs per person per year from taxable income. Married couples filing jointly may each use the full $100,000 limit if the gifts come from each spouse’s respective IRA.
  • No charitable deduction: If you exclude the QCD from income, you should not also claim that same amount as an itemized charitable deduction.
  • AGI reduction: Because QCDs are excluded from gross income, they reduce AGI. That can lower Medicare Part B/D IRMAA surcharges, reduce taxable Social Security benefits, and improve eligibility for certain tax credits and deductions that are AGI-sensitive.

Eligible charities and prohibited recipients

QCDs must be paid to qualifying public charities under Internal Revenue Code rules. Prohibited recipients include:

  • Donor-advised funds (DAFs)
  • Supporting organizations
  • Private foundations
    If you want to support a charity that operates a donor-advised fund or a private foundation, consider gifting to the charitable organization directly (if it accepts QCDs) or using other giving techniques such as appreciated securities (see FinHelp’s guide on “Donating Appreciated Securities: Tax and Timing Checklist”).

How to execute a QCD (practical steps)

  1. Confirm the charity’s status. Ask the organization whether it accepts QCDs and verify it is a qualifying public charity.
  2. Talk to your IRA custodian. Request a direct trustee-to-trustee transfer payable to the charity. Do not take the money yourself and then write a check; that can negate QCD treatment.
  3. Provide clear instructions. Include the charity name, address, and (if available) the charity’s EIN and purpose for the gift. If the gift is for a specific program, confirm the charity can accept designated QCD gifts.
  4. Get written confirmation. Obtain a contemporaneous acknowledgement from the charity showing the date, amount, and that no goods or services were provided in return. Keep this for your tax records.
  5. Review your Form 1099-R. Your IRA custodian will issue a Form 1099-R showing the distribution. Work with your tax preparer to ensure the QCD amount is excluded from taxable income on your return.

Documentation checklist:

  • IRA custodian transfer instructions and confirmation
  • Charity acknowledgement (written) with date and amount
  • Form 1099-R and any custodian statements
  • Your tax preparer’s notes on how the QCD was reported

Filing and reporting — what to expect on your tax return

There is no separate QCD line on Form 1040. The IRA custodian will issue Form 1099-R showing the distribution amount. Many custodians will report the taxable amount as zero for a proper QCD, but that is not universal. You or your tax preparer should clearly document the QCD on your tax return and retain the charity acknowledgement in case of IRS inquiry. Refer to IRS guidance for specific examples and instructions (IRS: Retirement Topics — Qualified Charitable Distributions).

Common pitfalls and how to avoid them

  • Treating a distribution as a QCD when you personally received the money first. The transfer must be direct (custodian to charity) to qualify.
  • Giving to a donor-advised fund or private foundation and expecting QCD tax treatment. Those recipients are disallowed.
  • Assuming QCDs are allowed only for current-year RMDs. You may make QCDs even in years when you have no RMD obligation, provided you meet the age test; however, the $100,000 cap and other rules still apply.
  • Relying on verbal confirmation only. Always get written acknowledgment from the charity and retain custodian records.

Planning ideas and professional strategies

  • Use QCDs when you don’t itemize. QCDs provide a way to get tax benefit for charitable gifts without needing to itemize deductions on Schedule A.
  • Offset IRMAA and Social Security taxation. Because QCDs reduce AGI, they can be a tactical tool to reduce Medicare premium surcharges and lower the taxable portion of Social Security benefits.
  • Combine with Roth conversion planning carefully. If you are doing Roth conversions, coordinate the timing: QCDs lower AGI, which can reduce the tax bite of a conversion in a given year.
  • Split gifts across years. If you plan larger philanthropic commitments, use the $100,000 cap each year or work with your advisor to blend QCDs with other giving methods like gifts of appreciated securities or donor-advised funds (keeping in mind DAFs can’t receive QCDs).

In my practice, I’ve found clients benefit most when we map charitable goals against expected RMDs and Medicare thresholds several years in advance. For example, shifting $20k–$50k a year via QCDs for three to five years can keep AGI below Medicare surcharge thresholds while supporting operating needs at favored charities.

Examples

  • Single IRA owner, age 75: Takes a $50,000 QCD to a qualifying nonprofit. The $50,000 excludes from taxable income and counts toward that year’s RMD. The custodian transfers funds directly to the charity and issues Form 1099-R showing a distribution; the taxpayer keeps the charity acknowledgement for records.
  • Married couple, both age-qualified: Each spouse may make up to $100,000 in QCDs from their own IRAs if desired, allowing a married couple to exclude up to $200,000 in QCDs total if both IRAs participate.

When a QCD is NOT the best option

  • If you want to give to a donor-advised fund or private foundation, a QCD won’t work. Consider making a taxable gift or using appreciated securities instead.
  • If your RMD is small and you itemize, compare the tax math of taking the distribution and claiming the deduction versus a QCD. For many taxpayers who do not itemize, QCDs are simpler and often preferable.

For an alternative tax-smart giving method, see FinHelp’s article: “Tax-Smart Giving: Strategies for Maximizing Charitable Impact” and our practical checklist for gifts of stock: “Donating Appreciated Securities: Tax and Timing Checklist”.

Frequently asked questions (brief)

  • Can I split a QCD among several charities? Yes — you may split the total QCD amount across multiple qualifying charities, subject to the annual $100,000 cap.
  • Will the charity issue a receipt? Yes — ask for a contemporaneous written acknowledgement that includes the date and that no goods or services were provided.
  • Do QCDs reduce my taxable income for state taxes? State treatment varies. Many states follow federal rules for income inclusion, but consult your tax advisor for state-specific consequences.

Sources and additional reading

FinHelp internal resources:

Professional disclaimer

This article is educational and does not constitute tax, legal, or investment advice. Rules and thresholds change, and individual situations vary. Consult a qualified tax advisor or financial planner before executing QCDs or making other tax-sensitive moves.