Qualified Charitable Distribution (QCD): A Tax-Efficient Way of Donating From your IRA

A&I Wealth Management > Blog > Financial Advice Services > Qualified Charitable Distribution (QCD): A Tax-Efficient Way of Donating From your IRA

Qualified Charitable Donation

When planning your IRA withdrawal strategy or if you are looking to make a non-deductible donation to charity, you may want to consider making charitable donations through a QCD: Qualified Charitable Distribution.  Learn how to make a charitable contribution out of your IRA. This special tax benefit allows you to avoid income tax and for your charity to receive the full distribution without paying any taxes!

The Basics of a Qualified Charitable Distribution

As income taxes go up, less and less people itemize their tax returns. This means, more and more people are filing a standard tax return. If you file a standard tax return, you do not get the tax benefit of making charitable contributions.

One important exception: In 2020 and 2021, you can deduct $300 from a standard tax return for charitable contributions. For the most recent limits, see Go Tax Free Resources.

If you want to make a donation to a charity and get your tax benefit, you may want to consider donating money out of your pre-tax retirement account.

Your Individual Retirement Account (IRA)

An Individual Retirement Account (IRA) is a type of account that allows you to put in pre-tax money, grow the money tax-deferred and then forces you to make a withdrawal after you reach retirement age. This is called the required minimum distribution (RMD).

Important: in 2021, the first year you have to pull money out of your IRA is age 72.

When you pull money out of an IRA, you must pay income taxes on that withdrawal. If you do not need the RMD money, then consider gifting it to charity.  Here is how it works.

Definition of Qualified Charitable Distribution (QCD)

A donation from your IRA directly to a charity is called a qualified charitable distribution (QCD). You talk with the charity and find out the information for their account. This includes the address, phone number, account number, routing number, etc. Then you send that information to the custodian for your IRA. If you work with an advisor at A&I Financial Services, we will handle all this for you.

Important: the money must move from your IRA directly to the charity in order to qualify as a QCD.

QCD Rules (or Eligibility)

Here are the qualified charitable distribution rules:

  • You must be age 70 ½ or older in the calendar year.
  • The money must move from your IRA directly to the charity.
  • A QCD cannot exceed $100,000 total in any calendar year.
  • And your spouse may also give up to $100,000 total from his IRA each year.

You Do Not Have to Itemize Your Taxes

When you do a qualified charitable distribution, you do not have to itemize your tax deductions to receive the tax benefits. Many people keep track of all their donations and at the end of the year sum them up and prepare a list they can use when they fill out their 1040 tax return. However, the QCD enables you to make a donation without having to itemize.

If you are itemizing your taxes already, you do not need to do a QCD. However, a QCD provides some benefits because now you can move all the money to your charity pre-tax and you do not have to itemize, saving some of the hassle.

Importantly, you do not want to make all of your charitable donations out of your IRA. If your IRA is invested for the long-haul, you likely have a number of investments in there. Each distribution may cause a new transaction, forcing some of your investments to be sold. So check with your custodian and find out if you have transaction costs. You will want to find the best way to arrange your financial affairs.

What is an Example Math for the QCD?

For each thousand dollar donation to a charity, then your benefits could be several hundred dollars. Let’s look at an example of a $1,000 donation for a person who is in the 24% tax bracket.

Important: for the most up-to-date tax bracket information, visit Go Tax Free Resources. In 2021, the 24% tax bracket covers people whose earnings are shown in the following table:

Lower income

Higher income

Unmarried individuals



Married couples



A distribution from an IRA would normally cost a person in these income tax brackets 24%. If the distribution is $1,000, then the taxes owed are $240. However, if that distribution is made to the charity, then no taxes are owed and they save $240.

Qualified Charitable Distributions impact on your taxes

If they want to make a charitable donation using money from an IRA, they have two choices:

  • Pull the money out and then write a check to charity
  • Send the money directly to charity

If they pull the money out, then they will pay income taxes on the distribution of 24%. For a $1,000 distribution, they elect not to withhold taxes. At the end of the year, their IRA custodian will issue a 1099 for $1,000. This will cost them $240, or 24% of $1,000. They itemize their taxes and claim a $1,000 charitable contribution, which gives them a $240 tax savings.  The net-net is no tax cost to them. However, it requires some work to send a charity $1,000.

If they send the money directly to charity, they want to obey the QCD rules. They pay zero taxes on the distribution and they receive zero dollars in charitable donations when they file their taxes. The charity receives $1,000.

How does a QCD affect my Social Security and Medicare?

If you make a qualified charitable distribution, your taxable income does not increase. This can save you on your Medicare Part B premiums in your Social Security payments.

When you are retired, your Medicare Part B benefits are deducted from your Social Security payments. For people with higher incomes, their premiums are higher. When you pull money out of your IRA, your taxable income increases. If it were to increase beyond the threshold, then your Medicare part B premiums would also increase. Even if you had only one year’s worth of higher income, you would pay more for your Medicare than you should!

The QCD avoids this expensive hassle. Your taxable income does not increase when you make a QCD to a charity out of your IRA.

Can I use a Qualified Charitable Distribution to Meet my Required Minimum Distribution?

A QCD can be used for an RMD. You may send your RMD to a charity if you want to. Your qualified charitable distribution may be used to cover your required minimum distribution. This is sometimes confusing, even to professionals. So make sure that you talk with someone who knows the charitable distribution rules.

QCD eligible Charities

Charities that qualify to receive money from a QCD include 501c(3) charitable organizations. You may not donate to a private foundation. Importantly, you may not make a QCD to a Donor Advised Fund.

Can I make a QCD to a Donor Advised Fund (DAF)?

No. Importantly, you may not make a QCD to a Donor Advised Fund.


A qualified charitable distribution is available for anyone over the age of 70 ½ who wants to make a donation to a charity and avoid paying taxes on an IRA distribution. The QCD saves the hassle and complications of tax itemization. QCD also avoids paying more for Medicare benefits than you have to pay. The most a person can contribute to a QCD is $100,000, or twice that for a married couple. If you have questions about performing a QCD, contact one of our financial advisors who would be happy to help you choose the best path for your unique situation.

Speak to a QCD Advisor

Interested in learning more on QCD? – Listen to our expert Podcast on QCD below:

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    About the author

    Karl Frank, Certified Financial Planner ®, MSF, MBA, MA, is the President of A&I Financial Services LLC, a local business that specializes in wealth management, insurance planning, and retirement planning. Karl cares for business owners and the businesses that care for them. Learn More about Karl.