Qualified charitable distribution (QCD)

Also called IRA charitable rollover

A transfer from an IRA directly to a charity, available from age 70½, that is excluded from taxable income and can count toward an RMD.

What it means

A qualified charitable distribution lets an IRA owner age 70½ or older send money directly from the IRA to a qualifying charity. The amount is left out of taxable income, which can be more valuable than a deduction because it lowers adjusted gross income whether or not the person itemizes. The law caps how much can be given this way each year.

Once required minimum distributions apply, a QCD can satisfy part or all of the RMD. QCDs must come from an IRA, not from a 401(k) or similar workplace plan, and the money must go straight to the charity rather than to the owner first. Donor-advised funds and private foundations generally do not qualify as recipients.

Example

Suppose a retiree must take a $15,000 RMD and sends $10,000 from the IRA directly to a charity as a QCD. The $10,000 counts toward the RMD and is not taxed, so only the remaining $5,000 they withdraw is added to taxable income.

How it’s used

Charitable giving by IRA owners in retirement
Reducing taxable income from RMDs
Keeping adjusted gross income lower for other tax and benefit calculations

Strengths and weaknesses

Strengths

Excluded from taxable income, even without itemizing
Can satisfy required minimum distributions
Lower AGI can reduce taxes tied to income levels

Weaknesses

Only available from age 70½
Only IRAs qualify, not workplace plans
Annual cap set by law
Cannot go to donor-advised funds

Good to know

Ask the IRA custodian to make the check payable to the charity; money paid to the owner first does not qualify.

Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.