Retirees who have assets in an IRA and make contributions to charities can use qualified charitable distributions (QCD) to reduce their federal income taxes. However, there are a few key rules you must comply with, or you could lose the tax savings.


The Tax Cuts and Jobs Act (TCJA), passed during the Trump administration, significantly curtailed the use of itemized tax deductions for charitable contributions by significantly raising the standard deductible. However, the TCJA left intact the rules for QCDs, which allow an IRA holder to make a direct distribution from their IRA to a bona fide charity (hence the name “qualified charitable distribution”).

The amount of the QCD won’t be included in the IRA owner’s taxable income for the purpose of calculating federal income taxes. This treatment is available even if you use the standard deduction on your tax return. As a result, the treatment of the QCD is the same as if you had claimed the charitable contribution as an itemized deduction.

Another advantage of QCDs is that they can count toward a taxpayer’s required minimum distribution (RMD). More on these rules later.

However, the IRS has a handful of rules regarding QCDs and RMDs that you need to know when planning to use QCDs, so let’s take a look. By the way, please pardon the acronym soup in this post.

You must make the QCD after you attain age 70-1/2

You can’t use QCDs until you actually attain age 70-1/2. So, you’ll need to determine the day you attain age 70-1/2, and then make your QCDs after that date. Any contributions you make before that date won’t receive the QCD treatment.

QCDs are limited to $100,000 per year per taxpayer

An individual can make QCDs up to $100,000 per tax year. For married taxpayers, each spouse can make QCDs of up to $100,000 per year, but the spouse who makes the QCD must be the owner of the IRA(s). If only one spouse owns one or more IRAs, then only that spouse is legally allowed to make a QCD of up to $100,000.

The $100,000 limit applies per taxpayer for all the IRAs combined that the taxpayer owns. If both spouses each have substantial amounts in their IRAs, they could conceivably make QCDs of as much as $200,000 in total each year.

QCDs must be made directly to the charity

QCDs must be made directly from your IRA(s)—you can’t write a check to the charity and later claim it as a QCD on your tax return. When making a QCD, be sure to tell your IRA administrator to make the QCD directly to the charity by December 31 of that calendar year. As a result of these restrictions, you’ll want to learn about your IRA administrator’s processes for making QCDs. You’ll also want to be sure your charity is set up to receive QCDs; not all charities will accept them.

You should use IRA accounts that haven’t previously been taxed

To reduce your taxable income with a QCD, you must make the payment from an IRA that hasn’t yet been taxed. While you could make a QCD from a Roth IRA, there’s no tax advantage since amounts in Roth IRAs have already been taxed.

Employer savings plans can’t make QCDs

If you have savings in an employer-sponsored plan such as a 401(k), 403(b), or 457 plan, you can’t make a QCD directly from these plans to a charity. However, you can roll over amounts from these plans to an IRA, and then use the IRA to make the QCD.

Coordinate your QCDs and RMDs

Starting with the calendar year during which you reach age 72, you must make minimum withdrawals, also known as required minimum distributions (RMDs), from IRAs that haven’t been previously taxed, and then include the withdrawals in your taxable income for the year. However, amounts that qualify as a QCD will count toward the minimum amount you need to withdraw.   

The IRS counts the first withdrawals from your IRA against the RMD, whether they’re QCDs or just regular withdrawals. So, if you want to minimize the income taxes on your IRA withdrawals, it’s a good idea to make your QCD payments before making any other withdrawals.

Many people write checks to their charities in December. If you do this, you might want to first determine how much you want to contribute through a QCD. Then you can decide how much additional money to withdraw from your IRA to meet your living expenses; this amount will be included in your taxable income.

Here’s a hypothetical scenario that helps explain the above situation: Jane is 75 years old, and the amount of the RMD from one of her IRAs in one year is $10,000. She decides to arrange for a QCD of $10,000 from that not-taxed-previously IRA and before making any other withdrawals. In this case, she’s satisfied her RMD requirement, and she isn’t required to make any additional withdrawals. If she doesn’t make any more withdrawals, she’ll owe no taxes on the amount of her QCD.

Here’s a twist to that scenario: Suppose Jane decides to only make a QCD of $5,000 from that same IRA. To satisfy the IRA’s RMD, she must withdraw another $5,000; that $5,000 will be the only withdrawal that’s included in her taxable income.

Different rules may apply to state income taxes

It’s important to point out that all the rules described in this post relate to federal income taxes. Each state can have different rules for the treatment of charitable contributions and distributions from IRAs, and it’s important that you know the rules for your state.

By now, your head might be spinning. However, stick with it and take the time to learn the rules for QCDs and RMDs. Be sure to check with your tax consultant to make sure you’ll comply with all the rules. You’ll save money on your income taxes, and you can be satisfied that you’re supporting your favorite charities.