What Is a Qualified Charitable Distribution [Benefits & How To]


By Dr. Jim Dahle, WCI Founder

Are you a retiree? Do you give money to charity? You’re almost surely doing it wrong. Let me explain. Do you know what a Qualified Charitable Distribution (QCD) is? If not, this post is for you!


What if I told you that you could give to charity using pre-tax dollars—even if you don’t itemize your deductions and even if you don’t want to hassle with a Donor Advised Fund—AND you could reduce the taxes due on your Required Minimum Distributions (RMDs) at the same time? Impossible you say? Likely to land you in jail? Nope. All perfectly legal, perfectly reasonable, and commonly done. Here’s how it works.


What Is a Qualified Charitable Distribution?

A Qualified Charitable Distribution (QCD) is money that is transferred directly from your tax-deferred account to a charity. Here are the key points:

  1. Tax-free to you (i.e., you never pay taxes on this money—it’s triple tax-free like an HSA used for healthcare)
  2. Tax-free to the charity (that organization doesn’t pay any taxes on it either)
  3. Counts toward the RMD for that year
  4. Cannot be more than $100,000 (though that will be indexed to inflation starting in 2024)
  5. Must go directly to the charity (you can’t touch it like an IRA rollover)
  6. Must come out of a traditional IRA or rollover IRA (not a 401(k), SEP-IRA or SIMPLE IRA)
  7. You must be 70 1/2
  8. Must be done during the calendar year (ideally check cashed by the charity by December 31)
  9. Originally became possible in 2006 but eventually made permanent in 2015
  10. Cannot be used to donate to a Donor Advised Fund (DAF)


What Qualifies as a Qualified Charitable Distribution?

A donation made directly from your IRA to a qualified charity can count as a QCD. A QCD is only applicable to adults aged 70 ½ or older. You can’t make a QCD from an ongoing SEP or SIMPLE IRA, but you can from a traditional IRA.

Qualified Roth IRA distributions are already tax-free, so taxes don’t apply regardless of whether it’s a donation.


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How to Report a Qualified Charitable Distribution

What does this look like? You fill out a form and ask the IRA provider to send a check directly to the charity and NOT withhold any taxes from the distribution. That’s it. You did it.

Your QCD is reported on your Form 1040 tax return. The amount of your QCD is listed on the line for IRA distributions, but you’ll put a zero for the taxable amount. Put QCD next to the amount to indicate why it’s not taxable.

If your RMD for the year was $40,000 and you were in the 22% tax bracket while wanting to donate $10,000, you would send $10,000 to the charity and take $30,000 as your RMD, paying $6,600 (instead of $8,800) in taxes.


Benefits of Qualified Charitable Distributions

Why do I think a QCD is the best way for a retiree to donate to charity? Let’s look at the other ways and consider their problems.


#1 Donate Directly and Deduct on Schedule A

With the new higher standard deduction [$29,200 for the 2024 tax year], a retired couple, even one who gives $10,000 a year to charity, probably isn’t going to itemize. So, they get zero tax breaks for the charitable deduction. Essentially, they’re doing it with after-tax dollars instead of pre-tax dollars. With a QCD, you can still take the standard deduction and pay with pre-tax dollars. Even if they are going to itemize, only part of their contribution is really pre-tax, since the first $29,200 in itemized deductions is basically free with the standard deduction. With a QCD, the entire thing is paid with pre-tax dollars. Plus, there’s no need to keep receipts and haul them all into the accountant or enter them into TurboTax.


#2 Donate Using a Donor Advised Fund (DAF)

DAFs were the cat’s meow of the blogosphere in 2017. They have some uses, but they have significant downsides such as ongoing management fees and the “jerk move” factor, where you get the tax deduction but the charity doesn’t immediately get the money. Most importantly, donations to DAFs have to be taken on Schedule A, just like a direct donation.


#3 Donate Appreciated Shares

qualified charitable distributions

This is a great way to flush capital gains out of your portfolio. You get the charitable deduction for the entire value of the contribution, and neither you nor the charity have to pay the capital gains taxes on the appreciation between the time you bought the shares and the time you donated them. However, this is a tactic for the young, not the old. There might be some unique situation for a retiree where it could make sense to take your full RMD and donate appreciated shares to the charity instead, but I’m having trouble thinking of one since the ordinary income tax rates paid on the RMD are higher than the capital gains taxes on the gains of the taxable shares. Plus, a retiree is much closer to death, where their heirs would get a step up in basis. In addition, this deduction is taken on Schedule A, unlike a QCD.

As you can see, other than a few situations, the best method for anyone taking RMDs is a QCD.

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Estate Planning and Qualified Charitable Distributions

On a related note, if you plan to donate some of your nest egg to charity at your death, be sure that money comes from your traditional IRA or, even better, your HSA since it can’t be stretched. It’s far better to leave the Roth IRA (tax-free and stretchable) or the taxable account (tax-free after the step up in basis) to your heirs. Meanwhile, neither you nor the charity pays taxes on the donation.


Qualified Charitable Distribution FAQs

Do QCDs count toward RMDs?

Qualified charitable distributions count toward RMDs. If you’re looking to make RMDs without taxes, Qualified Charitable Distributions can be an option. When in doubt, consult with a trusted tax professional. Here are some WCI-recommended options.

What are the QCD limits?

The maximum amount you can contribute as a QCD is $100,000. If Married Filing Jointly, your spouse can also contribute up to $100,000. Starting in 2024, the limit may increase with inflation and other factors.

How does the Secure Act affect QCDs?

Secure Act 2.0 includes several provisions impacting QCDs. Two noteworthy updates include a higher QCD limit starting in 2024 when the limit is indexed for inflation. The update also allows a one-time split-interest election, where you can fund up to $50,000 to either a Charitable Remainder Unitrust (CRUT), Charitable Remainder Annuity Trust (CRAT), or a Charitable Gift Annuity (CGA).

What do you think? Have you ever done a Qualified Charitable Distribution? Do you agree this is the best way for retirees to donate to charity? Why or why not? Comment below!

[This updated post was originally published in 2018.]

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