
A Qualified Charitable Distribution (QCD) is a tax-advantaged way for individuals to support their favorite charitable organizations directly from their retirement savings.
For those aged 70½ or older, the IRS allows donations to be made directly from an Individual Retirement Account (IRA) to a qualified charity, providing a means to support causes without incurring tax liabilities on the distribution. QCDs are particularly beneficial because they can satisfy Required Minimum Distributions (RMDs) for those over 73, lowering taxable income while maximizing charitable impact.
How QCDs Work
Here’s a quick rundown on how QCDs function:
Eligibility: You must be at least 70½ to make a QCD.
Contribution Limit: You can donate up to $108,000 per year through a QCD.
Tax Benefits: Because the funds go directly to charity, QCDs don’t count as taxable income, which can reduce your adjusted gross income.
RMD Fulfillment: If you’re 73 or older and required to take RMDs, a QCD can satisfy part or all of your annual RMD amount.
Frequently Asked Questions About QCDs
1. Can I make a QCD from a 401(k) or other retirement accounts? No, QCDs can only be made from IRAs. If you want to make a QCD and have other retirement accounts, you may need to roll funds into an IRA first.
2. Do I need to itemize my deductions to benefit from a QCD? No, one of the advantages of a QCD is that it reduces taxable income without requiring you to itemize deductions. This can be particularly helpful for individuals who take the standard deduction.
3. What kinds of charities qualify for a QCD? QCDs must go to 501(c)(3) charities eligible to receive tax-deductible donations. Certain types of charities, like donor-advised funds and private foundations, do not qualify.
4. Can I receive any goods or services in exchange for a QCD? No, the donation must be fully charitable without any exchange for goods, services, or benefits. Any such exchange would disqualify the QCD from tax-free status.
5. How do I report a QCD on my tax return? Your IRA custodian will issue a 1099-R form showing the distribution. When filing your tax return, report the QCD amount on the line for IRA distributions and write “QCD” next to it to indicate it’s not taxable.
6. Can I fund a Charitable Gift Annuity with a QCD? Yes, a Charitable Gift Annuity can be funded with a one-time contribution through a QCD from your IRA with a limit of $54,000 in 2025.
QCDs are a strategic way to align your financial stewardship with charitable giving goals, benefiting both you and the organizations you care about most. Talk to a member of our team today to see if a QCD could be part of your charitable giving strategy this year!
