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For many retirees, the holiday season is the perfect time to give back. And there’s an IRS-approved trick that can make your generosity go even further.
A qualified charitable distribution, or QCD, is a direct donation from your IRA that can lower your tax bill while helping your favorite charity.
“It’s one of the IRS’s best-kept secrets for retirees,” Ashton Lawrence, a certified financial planner at Mariner Wealth Advisors in Greenville, South Carolina, told CNBC (1).
So what exactly is a QCD and how does it work?
A qualified charitable distribution is a direct transfer from your pre-tax IRA to a qualified charity. Instead of withdrawing the money and then donating it, which counts as taxable income because it affects your adjusted gross income (AGI), you send it directly from your IRA and keep it entirely off your tax return.
According to Fidelity, QCDs are best for retirees who are 70½ or older who take required minimum distributions (RMDs), don’t itemize deductions, and have IRA balances that are typically in the mid-six figures or higher. Retirees with smaller IRAs may still benefit, but the tax impact may be less dramatic (2).
For 2025, retirees age 70½ or older can donate up to $108,000 this way, according to the IRS (3). Married couples can each waive this limit if both spouses qualify. Thanks to the Secure Act 2.0, this cap now adjusts for inflation each year.
Most Americans, 91% of filers according to the IRS, take the standard deduction instead of itemizing (4). While some have chosen not to itemize because it legitimately generates a higher deduction, others go this route because it tends to be easier. That means their regular charitable giving doesn’t actually reduce their taxable income.
QCDs are different.
There is no deduction because the money is simply excluded from income, which is “better than a deduction,” according to Juan Ros, CFP and partner at Forum Financial Management in Thousand Oaks, California (1).
If you’re 73 or older, you must start taking required minimum distributions (RMDs) from your retirement accounts before taxes, whether you need the cash or not. Skip it and the IRS hits you with a penalty.
A QCD allows you to donate some or all of your RMD directly to charity, meeting the requirement while avoiding tax.
“For my philanthropic clients, it’s almost a no-brainer,” added Jim Guarino, CFP and managing director at Baker Newman Noyes in Woburn, Massachusetts (1).
While QCDs can help lower your tax bill as well as lower your RMDs, determining the exact amount can be difficult. But a financial advisor can help you work through the math.
You can find an experienced financial advisor near you for free through Advisor.com. Their network includes fiduciaries – who are legally bound to act in your best interests – so you can trust that the advice you’re getting is unbiased.
In addition, advisors on the platform go through a rigorous vetting process based on track record, assets under management (AUM), client track record and regulatory background.
Here’s how to get started: Just enter some basic information about your financial situation and goals, and Advisor.com’s AI-powered advisor matching technology will match you best.
And for households looking for more personalized help, the Advisor Wealth Management (AWM) platform combines AI-based tools with hands-on support from experts to keep your plan on track.
But choosing an advisor still comes down to a personal connection. That’s why Advisor.com lets you set up a free, no-obligation initial consultation to see if they’re right for you.
To make a QCD, you’ll need an IRA, but what if your retirement funds are still in a 401(k) or other plan?
You’ll need to roll it over to a traditional IRA. Most 401(k) and employer plans allow rollovers to IRAs, which then become QCD eligible. Once the funds are in the IRA, you can have the custodian send the donation directly to a qualified 501(c)(3) charity, which keeps the money out of taxable income.
Remember that time is of the essence. IRS rules generally require transfers to be completed within 60 days to avoid penalties. Donor-advised funds and private foundations don’t qualify, so check the charity before transferring.
By moving your 401(k) or other retirement savings into an IRA first, you can unlock the full tax benefits of QCDs, even if you didn’t start with an eligible account.
Key things to remember:
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You must be at least 70 and a half when the donation leaves the IRA – note that SEP and SIMPLE IRAs are not eligible. (5)
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Tell your IRA custodian to send the money directly to the charity and not to you.
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Verify that the organization is a qualified 501(c)(3), as donor-advised funds and private foundations are not considered.
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Keep all receipts and records.
Federally, QCDs are excluded from income, but tax treatment may vary by state. Some states fully comply with IRS rules, while others do not. Before moving money around, double check with your state’s Department of Revenue or a tax professional.
For retirees looking to give generously and reduce their tax, QCDs could be a win-win. With one move, you can satisfy RMDs, keep your income lower, and support the causes you care about.
While QCDs are a great way to give back, understanding how they impact your finances, especially in retirement, is critical.
High net worth individuals can receive proactive advice across their entire financial life – from investments and taxes to estate planning – through Range.
You can get 24/7 professional advice from experts at a fraction of the cost of traditional Certified Financial Planners (CFPs). The range offers 0% AUM advisory fees and a fixed fee structure so you can keep more of your wealth.
It also offers an all-in-one solution for everything from alternative asset management to tax – all informed by modern AI solutions, but backed by a team of certified financial professionals.
Plus, you can get a personalized cash flow analysis—helping you figure out how much of your disposable income you could allocate to qualified charitable distributions without affecting your lifestyle.
The best part? You can book a free demo with the experts at Range to see if they can meet your complete financial needs.
Read more: Warren Buffett used 8 solid, repeatable rules to turn $9,800 into a $150 billion fortune. Start using them today to get rich (and stay rich)
We only rely on verified sources and credible third-party reports. For details, see editorial ethics and guidelines.
We only rely on verified sources and credible third-party reports. For details, see our ethics and editorial guidelines.
CNBC (1); Fidelity Charitable (2); IRS (3, 5); Fiscal Policy Center (4)
This article provides information only and should not be construed as advice. Offered without warranty of any kind.
