Quick overview

Qualified Charitable Distributions (QCDs) allow eligible IRA owners to make tax-favored charitable gifts by instructing their IRA custodian to send funds directly to a qualified charity. The transfer is excluded from the donor’s taxable income (not claimed as a deduction) and can satisfy the owner’s required minimum distribution (RMD) for the year. QCDs were established by the Pension Protection Act of 2006 and remain a common tool for tax-efficient giving (see IRS guidance: https://www.irs.gov/retirement-plans/qualified-charitable-distributions-qcds).

Who is eligible and what are the limits?

  • Age: The donor must be at least 70½ at the time of the distribution. This age test remains separate from changes to RMD ages enacted in later laws.
  • Eligible accounts: QCDs must originate from IRAs (traditional and Roth IRAs). Employer plan distributions (401(k), 403(b), etc.) aren’t QCD-eligible unless the funds are rolled into an IRA first.
  • Annual limit: The statutory annual cap for QCDs is $100,000 per taxpayer. Married couples with separate IRAs can each make QCDs up to $100,000 from their own IRAs.
  • RMD treatment: A QCD up to the annual limit can satisfy all or part of the year’s RMD.
    (Authoritative source: IRS QCD page and Publication 590-B: https://www.irs.gov/retirement-plans/qualified-charitable-distributions-qcds; https://www.irs.gov/publications/p590b)

What counts as a qualified charity (and what doesn’t)

Qualified recipients are generally public charities described in Internal Revenue Code section 170(b)(1)(A). Common qualifying recipients include religious organizations, public charitable foundations, and many nonprofit hospitals and schools. Disallowed recipients include:

  • Donor-advised funds
  • Supporting organizations under IRC section 509(a)(3)
  • Private foundations
    Contributions routed through these disallowed vehicles will not qualify as QCDs even if the underlying charity would otherwise be eligible.

Can QCDs come from a Roth IRA or an inherited IRA?

  • Roth IRAs: Yes, QCDs may be made from Roth IRAs. Because qualified Roth distributions are typically tax-free anyway, donors usually use Roth QCDs selectively (for example, to lower AGI or satisfy RMD-like needs if applicable).
  • Inherited IRAs: QCDs generally cannot be made from an inherited IRA where the IRA owner is a beneficiary (non-spouse inherited IRA).

How to make a QCD (step-by-step)

  1. Verify eligibility: Confirm you’re age 70½ or older and that the IRA is eligible for a QCD.
  2. Confirm the charity: Check the IRS Exempt Organizations Select Check or Charity’s status and confirm the charity is not a private foundation, donor-advised fund, or supporting organization.
  3. Instruct the custodian: Ask your IRA custodian to make a direct trustee-to-charity transfer. The check or electronic transfer should be payable to the charity, not to you.
  4. Document the gift: Obtain a contemporaneous written acknowledgment from the charity showing the amount and date of the QCD. Keep custodian confirmations and bank or check images.
  5. Report properly: Expect a Form 1099-R for the distribution. On your tax return, report the distribution and exclude the QCD amount from taxable income as permitted (see Tax Reporting below). See IRS Pub. 590-B for details.

Tax treatment and reporting

  • Exclusion from income: A QCD is excluded from taxable income up to $100,000 per year. It does not generate an itemized charitable deduction.
  • Reporting on Form 1040: Your IRA custodian usually issues Form 1099-R showing the distribution amount. You should show the distribution on Form 1040 but exclude the QCD amount (follow IRS instructions; see Publication 590-B and the IRS QCD page for current reporting guidance).
  • Interaction with tax credits and limitations: Because a QCD reduces adjusted gross income (AGI), it can help taxpayers qualify for tax credits or avoid phaseouts tied to AGI.
    (IRS QCD guidance: https://www.irs.gov/retirement-plans/qualified-charitable-distributions-qcds)

QCDs and Required Minimum Distributions (RMDs)

QCDs can satisfy all or part of the RMD for the year. For many retirees, using a QCD to fulfill an RMD is an efficient way to make charitable gifts without increasing taxable income. If your RMD exceeds the QCD, you’ll need to take the remaining amount as a taxable distribution. See our deeper discussion of RMD planning and exceptions for more context: Required Minimum Distributions (RMDs) Demystified.

Practical examples

  • Example 1: Sarah, age 74, has a $50,000 RMD and a desire to give $30,000 to her church. She instructs her IRA custodian to transfer $30,000 as a QCD. That $30,000 is excluded from her income and counts toward the $50,000 RMD; she must still withdraw (and pay tax on) $20,000.
  • Example 2: John and Maria, each with separate IRAs, each make $100,000 QCDs to qualified charities in the same tax year. They exclude $200,000 combined from taxable income (each limited to $100,000 from their own IRA).

Strategic uses and planning tips

  • Lower AGI: Because QCDs reduce AGI, they can limit high-income phaseouts, affect Medicare Part B/ DIR premium calculations, and reduce taxation of Social Security benefits.
  • Timing: Make QCDs late in the year after confirming RMD calculations. Alternatively, split QCDs across years to manage AGI.
  • Coordinate with tax advisors: Work with your CPA or financial planner to confirm year-by-year impact and proper tax reporting.

Common mistakes to avoid

  • Letting the check be payable to you: The donor must not receive the funds first. Ensure the custodian pays the charity directly.
  • Giving to disallowed recipients: Donor-advised funds, supporting organizations, and private foundations invalidate QCD treatment.
  • Exceeding the $100,000 limit: The excess becomes a taxable distribution.
  • Relying solely on custodian language: Confirm the custodian reports the transaction correctly and obtain charity acknowledgments.

Recordkeeping and proof

Keep:

  • Custodian transfer confirmations showing trustee-to-charity payment
  • Charity acknowledgment with the amount and date
  • Form 1099-R
  • Any communication with your tax preparer
    These documents support exclusion of the QCD from income if the IRS follows up.

When a QCD may not be the best move

  • If you claim itemized deductions and benefit from larger charitable deductions (rare after the 2017 tax law’s larger standard deduction), a traditional charitable deduction might be more valuable for donors under 70½ or when QCD limits aren’t sufficient.
  • Donor-advised funds: If you want to contribute to a donor-advised fund to advise future grants, QCDs do not qualify.

Sample checklist before directing a QCD

  • Confirm age 70½ or older at distribution date
  • Verify charity qualifies (not a donor-advised fund/private foundation)
  • Confirm IRA type and that it isn’t an inherited IRA subject to restrictions
  • Request trustee-to-charity transfer from custodian
  • Obtain written acknowledgment from the charity
  • Coordinate tax reporting with your CPA

Further reading and internal resources

Sources and authority

Professional disclaimer: This article is educational only and does not constitute personalized tax or legal advice. Rules and thresholds can change; consult a qualified tax advisor or ERISA/estate planning attorney before making decisions based on your personal situation.