How qualified charitable distributions work and how they can help offset tax burdens
By Gregg Millward, Whittier Trust Client Advisor
Anyone nearing the age of 70 should be aware that you will soon have some age-specific tax rules to consider in managing your money. The good news is that many of them are quite beneficial.
Generally speaking, by age 73, you must begin taking distributions from your tax-deferred retirement account, whether it is a traditional IRA (individual retirement account), SEP, SIMPLE, or employer-sponsored retirement plan such as a 401(k). You may have already begun withdrawing money from your IRA, but by April 1 of the year following the year you reach your required beginning age, the IRS mandates a particular amount you must take, called the required minimum distribution (RMD). That amount changes each year, based on your age and the account balance in your retirement savings, and the distribution is taxed as ordinary income.
But what if you don’t actually need that additional income this year? Perhaps you’d like to support a charity with that money instead. Thanks to the qualified charitable distribution, or QCD, you can satisfy all or part of your RMD—and avoid income tax on the distribution—by donating that money directly to charity.
How the QCD Works
If you’re unfamiliar with the advantages of a QCD, you’re not alone. The topic rarely comes up until you reach the age when the tax code mandates distributions. Or perhaps you’ve heard of the same concept under another name, such as IRA charitable distributions or IRA charitable rollovers. Regardless of the term, this tax-efficient solution allows an individual at age 70 and a half or older (at the time of distribution) to donate up to the maximum allowable amount directly from an IRA to a qualified charity, tax-free.
As of 2026, the QCD maximum is $111,000 per individual, but the number is adjusted annually for inflation and other factors. For married couples, each spouse can take up to the $111,000 limit for a potential total of $222,000.
Here a few of the rules to keep in mind if you’re considering taking advantage of a QCD:
- The distribution must go to an eligible charity.
- You are allowed to divide the distribution among multiple qualified 501(c)(3) organizations, provided the sum of the distributions is within the $111,000 limit.
- The donation must be transferred directly from your IRA custodian to the charities. It can’t be distributed to you first and then gifted.
- The transaction must be completed by December 31, just like any other required minimum distribution for an IRA.
- QCDs can be made from any (or more than one) of the IRA types (traditional, inherited, inactive SEP and inactive SIMPLE IRAs).
- You cannot claim a separate charitable income tax deduction for the QCD amount excluded from income.
- QCDs cannot be made to a DAF (donor-advised fund), private foundation, or organizations that support either of those entities.
Benefits of the QCD
A QCD accomplishes two things: It reduces your adjusted gross income for the year, and it avoids taxes on up to $222,000 for a married couple taking a withdrawal from their IRA. This means you are leveraging these funds to their fullest, as opposed to receiving the IRA income, getting taxed on it, and then making a donation to charity.
A few more important notes about a QCD:
- A QCD will bring down the balance of your IRA, which may reduce your required minimum distribution in future years.
- If you itemize deductions on your taxes, QCDs are not counted toward the maximum amounts deductible. The $111,000 per individual can be above and beyond those limits. For this reason, a QCD might possibly allow you to make a larger philanthropic gift than if you simply donated cash or other assets.
- You have the entire year to satisfy your required minimum distribution, allowing you time to decide whether to apply all or part of the RMD to a qualified charitable distribution.
- Some nonprofit organizations will be knowledgeable about QCDs and ready to facilitate this type of donation for you. Some might even be working to educate their donors and encourage QCD donations. For others, you might find that you are the one educating them. This may be a service you are happy to provide, to help a smaller nonprofit take their fundraising expertise to the next level. Or you may realize that the organization doesn’t have the capacity to be a good steward of your gift. Either way, a conversation with the director(s) of that nonprofit should help you determine your best move.
Americans tend to be charitable, and the U.S. tax code supports those philanthropic intentions. The QCD offers an opportunity to accomplish something meaningful and impactful with your retirement funds and is a useful device in your financial tool belt whenever, and to whatever extent, you may choose to employ it. Your financial advisors should be able to assist you in comparing the tax advantages and impact of different charitable vehicles and consider which make the most sense for your personal needs and goals.
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Gregg Millward is a Vice President and Client Advisor in Whittier Trust’s Pasadena office, providing a full range of wealth management, family office and trust services to affluent individuals and families.