Qualified Charitable Distribution (QCD)

A Qualified Charitable Distribution (QCD) is a direct transfer of funds from an IRA to a qualifying charitable organization. To be eligible, you must be at least age 70½ at the time of the distribution. The donated amount is excluded from your adjusted gross income (AGI), even though it can satisfy part or all of your Required Minimum Distribution for the year.

The annual QCD limit has been indexed to inflation starting in 2024, courtesy of the SECURE 2.0 Act. For 2025, the limit is $105,000 per individual. SECURE 2.0 also introduced a one-time option to direct up to $53,000 from an IRA to a charitable remainder trust or charitable gift annuity as a QCD, though this is a one-time election with its own set of rules.

Because a QCD is excluded from AGI, it may provide tax benefits beyond what a standard charitable deduction would offer. Reducing AGI can affect the taxation of Social Security benefits, Medicare premium calculations (IRMAA), the net investment income tax threshold, and eligibility for other income-sensitive tax provisions. For retirees who take the standard deduction and would not otherwise benefit from itemizing charitable gifts, QCDs can be especially advantageous.

To qualify, the distribution must go directly from the IRA custodian to the charity — you cannot withdraw the funds first and then donate them. QCDs can be made from Traditional IRAs, inherited IRAs, and inactive SEP or SIMPLE IRAs, but not from employer plans like 401(k)s. Additionally, the charity must be a 501(c)(3) organization; donor-advised funds and private foundations generally do not qualify.