For many retirees, giving back to causes they care about is a meaningful part of life. What if you could support the organizations you love and reduce your taxable income at the same time? That’s the power of a Qualified Charitable Distribution (QCD). Below we explain who qualifies, how QCDs work, recent limits, and practical tips to get them right.
What is a Qualified Charitable Distribution?
A Qualified Charitable Distribution (QCD) is a direct transfer of money from your IRA to a qualified charity. Unlike a regular withdrawal, the amount you give through a QCD is excluded from your taxable income which means you can give generously without increasing your tax bill.
QCDs are available once you reach age 70½, and they are one of the most tax-efficient ways to give in retirement.
How QCDs Work with Required Minimum Distributions (RMDs)
Starting at age 73 — or age 75 for those born in 1960 or later — the IRS requires you to take Required Minimum Distributions (RMDs) from your IRA each year. For many retirees, those withdrawals can push taxable income higher than desired. A QCD can count toward your RMD, but since the funds go directly to a charity, they don’t increase your taxable income.
2025 QCD Limits
The annual QCD limit is indexed for inflation:
- 2025 Limit: $108,000 per person
- Married couples with separate IRAs can each give up to $108,000
This makes QCDs not only a meaningful way to support charities but also a significant planning tool for managing taxes in retirement.
Why Consider a QCD?
- Lower taxable income: Even if you don’t itemize deductions, QCDs reduce your Adjusted Gross Income (AGI).
- Satisfy your RMD: Meet IRS requirements while supporting causes you care about.
- Protect your tax bracket: A lower AGI can help avoid higher Medicare premiums (IRMAA) and keep you in a more favorable tax range.
- Maximize your impact:Give directly to charities in a way that benefits both them and you.
Rules You Need to Know
- QCDs must come directly from your IRA custodian to the charity.
- Employer retirement plans (like 401(k)s) are not eligible, though funds can often be rolled into an IRA first.
- The charity must be a qualified 501(c)(3) public charity. Money cannot go to donor-advised funds, supporting organizations, or most private foundations.
- The transfer must be completed by December 31 for it to count in the current tax year.
Quick QCD Checklist
- You are age 70½ or older
- You have an IRA (not an active 401(k), SEP, or SIMPLE receiving contributions)
- You want to reduce taxable income while satisfying your RMD
- The amount is within the 2025 limit ($108,000 per person)
- The charity is a qualified 501(c)(3) organization
- Your IRA custodian will send the funds directly to the charity
- Obtain an acknowledgment letter from the charity for your tax records
A Tax-Smart Way to Support What Matters Most
A Qualified Charitable Distribution is more than just a gift. It’s a strategy that allows you to align your financial goals with your personal values, all while managing your tax picture in retirement.
At Trinity Wealth Management, we specialize in helping retirees make the most of opportunities like QCDs. If you’re wondering whether this strategy fits into your retirement and charitable giving plans, we’d love to help. Contact us to explore how QCDs can be part of your financial plan.
Stay Ahead with Expert Guidance
Sources:
1RMDs begin at age 75 for those born January 1, 1960 or later
2Exceptions to the 10-year rule include: surviving spouse, minor children of the decedent, those critically ill or disabled, and those not more than 10 years younger than the original account holder.
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