If you’re 70½ or older and have an IRA, there’s a smart and tax-efficient way to give back to the causes you care about: Qualified Charitable Distributions (QCDs). These special distributions let you donate directly to a charity from your IRA without adding to your taxable income—up to $108,000 annually as of 2025. It’s a win-win for your finances and your favorite nonprofits.
Not only can a QCD help you meet your Required Minimum Distribution (RMD), but it can also lower your taxable income. Let’s break it down so you can see how QCDs can work for you.
What Is a Qualified Charitable Distribution?
Think of a QCD as a direct link between your IRA and a charity. When you make a QCD, the money goes straight from your IRA to the charity, skipping over your taxable income. This way, you avoid increasing your tax bill while still making a significant impact.
QCDs have seen remarkable growth in recent years, with the average gift size increasing by 35% from 2020 to 2021 and total gifts skyrocketing by 390% between 2019 and 2021. This surge highlights how more individuals are discovering the power of QCDs for tax-efficient giving.
QCDs can be made from traditional IRAs, inherited IRAs, or inactive SEP and SIMPLE IRAs. However, they don’t apply to workplace retirement plans like 401(k)s. Beginning in 2025, the annual QCD limit will be adjusted for inflation, with the new limit set at $108,000. This ensures greater flexibility for planning charitable giving in future years.
Who Can Use a QCD?
To make a QCD, you need to meet a couple of eligibility criteria:
- Be at least 70½ years old.
- Have a qualifying IRA, such as a traditional or inherited IRA.
For individuals aged 73 or older, QCDs are particularly helpful because they count toward RMDs while reducing taxable income. This dual benefit makes QCDs an effective tax management tool for retirees.
Each eligible IRA owner can donate up to $108,000 in 2025, and married couples can combine their giving power by donating up to $216,000, provided each spouse meets the qualifications and has a separate IRA.
Why Choose a QCD?
Here’s why QCDs are such a popular strategy for retirees:
- Tax Savings: Since QCDs don’t add to your taxable income, you avoid bumping into a higher tax bracket or losing valuable tax deductions.
- Ease of Use: You don’t have to itemize deductions to benefit from a QCD. Even if you take the standard deduction, you can still enjoy the tax perks.
- Impactful Giving: Every dollar you donate through a QCD goes directly to the charity because it’s tax-free.
How to Make a QCD
Making a QCD is simpler than you might think, but there are a few rules to follow:
- Direct Transfers Are Key: The money must go straight from your IRA custodian to the charity. If it lands in your account first, it won’t qualify.
- Pick the Right Charity: Use the to confirm the charity is a 501(c)(3) organization eligible to receive QCDs.
- Plan Ahead: Start early to ensure your donation is processed in time to meet your RMD deadline.
Following these steps helps you get the full tax benefit while supporting your favorite causes.
QCDs vs. Other Charitable Strategies
Qualified Charitable Distributions (QCDs) bring unique advantages to charitable giving. Their tax benefits often surpass those of cash donations, making them a highly efficient way to support meaningful causes. That said, donating appreciated stocks may sometimes offer greater tax advantages, depending on the broader financial strategy.
For individuals seeking immediate tax deductions, donor-advised funds might be a better fit. These allow for large charitable contributions within the same tax year, which can be useful for quick tax savings. However, QCDs stand out for those who take the standard deduction, as they lower adjusted gross income without requiring itemized deductions.
It’s important to note that not all charities are eligible to receive QCDs, which can limit their use in certain philanthropic plans. Working with a tax professional is essential to understand how QCDs fit into an overall giving strategy. Comparing QCDs to other options helps individuals make informed decisions that align with both financial goals and charitable aspirations.
Making QCDs Work
The information provided is only intended for educational purposes to show an example of this type of offering.
At age 93, one of my clients—a retired physician—used a $50,000 Qualified Charitable Distribution (QCD) to establish a charitable gift annuity (CGA) for his 81-year-old wife. By working together, we ensured this strategy satisfied his Required Minimum Distribution while providing his spouse with $3,900 in annual income. This approach not only supported his charitable goals but also maintained financial security for his family.
Why Work With a Tax Professional?
The rules around QCDs can be tricky, so it’s wise to get expert guidance. A tax professional can:
- Ensure your QCD complies with IRS regulations.
- Help you report it properly on your taxes (typically using Form 1040).
- Maximize the benefits based on your financial situation.
Working with a pro means you can focus on giving while they handle the details.
Interestingly, nonprofits that promoted QCDs to donors at least three times were 3.2 times more likely to receive 10 or more gifts. This underscores the importance of spreading awareness about QCDs—something a financial or tax professional can help facilitate for both donors and charities.
A Smarter Way to Give Back
Qualified Charitable Distributions are more than just a tax-saving strategy—they’re a way to make a meaningful impact while managing your finances. Whether you’re meeting your RMD, supporting a favorite cause, or planning for your spouse’s future, QCDs offer flexibility and benefits that are hard to beat.
Talk to your financial advisor to see how QCDs can fit into your charitable giving and retirement plans. Start planning now to take advantage of this tax-efficient way to support the causes that matter most.
IMPORTANT DISCLOSURES
The information included in this document is for general, informational purposes only. It does not contain any investment advice and does not address any individual facts and circumstances. As such, it cannot be relied on as providing any investment advice. If you would like investment advice regarding your specific facts and circumstances, please contact a qualified financial advisor.
HBKS® Wealth Advisors is not a legal or accounting firm, and does not render legal, accounting or tax advice. You should contact an attorney or CPA if you wish to receive legal, accounting or tax advice.
The historical and current information as to rules, laws, guidelines or benefits contained in this document is a summary of information obtained from or prepared by other sources. It has not been independently verified, but was obtained from sources believed to be reliable. HBKS® Wealth Advisors does not guarantee the accuracy of this information and does not assume liability for any errors in information obtained from or prepared by these other sources.
Investment Advisory Services offered through HBK Sorce Advisory LLC, d.b.a. HBKS Wealth Advisors. Not FDIC Insured – Not Bank Guaranteed – May Lose Value, Including Loss of Principal – Not Insured By Any State or Federal Agency.
