Charitable Giving Strategy: Qualified Charitable Distribution

by | | Other Cool Stuff, Taxes

Qualified Charitable Distribution

If you’re over age 70.5, you can make a Qualified Charitable Distribution from your IRA. You pay no tax, and neither does the charity. This is a tax-smart way to give during your lifetime.


When you withdraw from a pre-tax retirement account, you normally pay income tax.

Once you reach age 70.5, you can send money from your IRA directly to charity. This is called a Qualified Charitable Distribution (QCD). Because the QCD goes directly to charity, you pay no tax, so the charity keeps all the money.

Once you reach age 72, you must take annual Required Minimum Distributions (RMDs) from pre-tax retirement accounts. If you don’t need your RMD, consider giving it to charity with a QCD.


You just turned 72, and your RMD from your IRA is $40K this year. You worked at a university hospital and receive a state pension. Your pension, along with your Social Security, fully covers your living expenses.

So, you want to give your RMD to charity. Let’s compare two ways to do this.

Withdraw, then give to charity

Assume your tax rate in retirement is 22% federal and 5% state.

If you withdraw $40K payable to yourself, the IRS gets 27% ($10,800), and you get $29,200.

You turn around and give the $29,200 to charity. Not bad, but it could be better.

(You could add the $29,200 to your itemized deductions on your tax return, but you might not get as much tax benefit as you think, unless you’re bunching donations.)

Qualified charitable distribution

You have your IRA custodian send your $40K RMD directly to charity. This is a QCD.

You pay no tax, so the IRS gets nothing (!) and the charity gets $40K. That’s more like it!

Do It Right On Your Tax Return

When you withdraw from your IRA, the custodian sends you a Form 1099-R next January.

Form 1099-R tells the IRS how much you withdrew. It does NOT tell the IRS that the money went directly to charity. So, the IRS still thinks your withdrawal is taxable, unless you tell them it’s not.

Be sure to tell your tax preparer that you made a QCD. In our example above, your tax return should show a $40K IRA distribution with a $0 taxable amount.

More Fine Print

A QCD is simple, but it’s not easy. Do it right so you and the charity can reap the benefits.

  • You can only do a QCD from an IRA, not a 401(k).
  • You can do a QCD at age 70.5, even though RMDs don’t start until 72.
    • RMDs used to start at 70.5. When they moved the RMD age to 72, they left the QCD age at 70.5.
  • You must actually be 70.5 on the date you do the QCD. Turning 70.5 later in the year doesn’t count.
  • Your IRA custodian must make the check payable to the charity, not to you.
    • Your custodian can mail the check to the charity, or to you. It’s easier just to mail it to the charity.
  • You can give up to $100K per year as a QCD.
    • A married couple can give $100K per person ($200K total). Each spouse must be 70.5 to do a QCD.
  • You can only make a QCD to a public charity, not a private foundation.

For even more nerdy details, check out Michael Kitces’ post on QCDs.

To learn more about what charitable giving strategies are best for you, schedule a FREE Financial Pulse Assessment™. This is a 3-step process to get clarity on your finances and “test drive” our services.

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