6 Common Mistakes to Avoid When Making a Qualified Charitable Distribution (QCD)

A Qualified Charitable Distribution (QCD) is a powerful strategy to create ministry impact while also reducing your taxable income in retirement, but only if done correctly. While QCDs are relatively simple in concept, there are still common pitfalls that can prevent your gift from qualifying and maximizing its potential.

Here are six common mistakes to avoid when making a QCD:

Mistake 1: Not Meeting the Age Requirement

You must be at least 70.5 years old at the time of the distribution, not just turning 70.5 during the calendar year. This is a common point of confusion for many and could result in the gift being treated as taxable income if the requirement isn't met precisely.

Mistake 2: Using the Wrong Type of Account

QCDs can only be made from traditional IRAs. Distributions from 401(k)s, 403(b)s, or other types of retirement accounts do not qualify. If your funds are in a different account, you will need to roll them into an IRA first and then initiate the QCD from there.

Mistake 3: Taking the Distribution Yourself

For a gift to count as a QCD, it must be made directly from your IRA to the charitable organization. If the distribution is made payable to you and then donated, it will count as regular income, and you won't receive the QCD tax benefit.

Mistake 4: Donating to a Non-Qualified Charity

Not all nonprofits are eligible to receive QCDs. Contributions must go to a qualified 501(c)(3) public charity. You cannot make QCDs to donor-advised funds, private foundations, or supporting organizations. Always verify the charity's eligibility before giving.

Mistake 5: Expecting a Benefit in Return

A QCD must be a pure gift, meaning you cannot receive anything of value in return (like sporting tickets, a dinner, or any other benefits). Any exchange, no matter how small, can disqualify the distribution from QCD treatment.

Mistake 6: Incorrectly Reporting It on Your Tax Return

Your IRA custodian will send you a 1099-R form for your distribution. Beginning with the 2025 tax year, the IRA custodian will be required to use a new code (Y in Box 7) to indicate that the distribution was a QCD. Regardless, it’s important to keep documentation of the QCD gift and verify that the 1099-R from the IRA custodian correctly reflects it as a QCD. Consulting with your tax preparer before and after making a QCD is also recommended to ensure you receive the maximum benefit from your gift.

Maximize Your Impact...Without the Mistakes

QCDs offer a smart way to steward your resources, fulfill Required Minimum Distributions (RMDs), and support the gospel-advancing causes you care about. If you're considering a QCD this year, our team is here to help you avoid these common pitfalls and guide you every step of the process.