“I’m forced to take an RMD… but I was going to give money to charity anyway.”
…then you’re exactly the person a Qualified Charitable Distribution (QCD) was built for.
RMDs often feel annoying for one simple reason: they can create income you likely didn’t need. And in retirement, “extra income” doesn’t just raise your tax bill — it can trigger a chain reaction:
- more of your Social Security becomes taxable
- higher Medicare premiums through IRMAA
- reduced ability to take income-based deductions
- surprise estimated tax payments or withholding issues
A QCD is one of the cleanest planning moves available once you’re in the RMD years if you’re already charitably inclined.
What is a QCD (in plain English)?
A Qualified Charitable Distribution is a donation that goes directly from your IRA to a qualified charity.
When done correctly, that donation is excluded from your gross income and therefore your taxable income (up to the annual limit). That’s the whole advantage and it can have some pretty large tax incentives in particular situations.
A QCD is different because it works upstream which is different from most deductions:
- it keeps the IRA distribution from showing up in gross income on the tax return
- it can help reduce the downsides of some retirement “ripple effects” (Social Security taxation + IRMAA)
One important note: You don’t get to double-dip. If the distribution is treated as a QCD (kept out of income), you don’t also claim it as a charitable deduction. It’s one or the other. So when making a QCD, that amount won't show up in income and won't show up as a charitable deduction.
Why QCDs become a big deal once RMDs start
RMDs are typically taxable. So even if you don’t need the money, you’re forced to pull it onto your return. If not planned for, RMDs can create significant unexpected tax issues that increase the amount of taxes you pay.
A QCD lets you “aim” some or all of your RMD at something you were already going to support without inflating your Adjusted Gross Income (AGI).
So, let’s say you’re already donating every year. With a QCD, it is often a better situation than:
Taking the RMD → depositing it → writing a check to charity
Because the deposit method increases AGI, and the QCD is not included in AGI.
So why is AGI a big deal? It is an important number for a lot more than just your tax bracket. We will get to some of these reasons later.
The three rules that matter most (the ones people accidentally break)
1) You must be age 70½ or older
This is one of the most common points of confusion. A person may be eligible and not realize it.
- QCD eligibility starts at 70½
- RMD age is now later
So you can be eligible for QCDs before RMDs start — and then QCDs can become even more valuable once RMDs do begin.
2) The gift must go directly from the IRA to the charity
This is the biggest execution issue.
If the money is paid to you first (even for a moment), it generally no longer qualifies as a QCD.
Practical tip: many custodians will cut a check payable to the charity and mail it to you so you can deliver it. There are situations where this can still qualify because the check is not payable to you but you want to follow your custodian’s QCD process carefully.
3) Not every “charitable destination” qualifies
Just because the contribution is to a charity doesn’t mean the recipient and the gift qualify for QCD treatment. It is important for those seeking RMDs to ensure that the charity qualifies for QCD treatment.
The big one here is donor-advised funds (DAFs).
A lot of retirees like DAFs (and they can be great). But QCDs generally can’t go to a DAF. So if your giving strategy is centered around a DAF, this may not be the right tool.
How to use QCDs when RMDs are required
First off, QCDs are typically not seen as profitable unless you have already determined you're going to give to a charity anyways. By giving to charity, you are losing 100% of each dollar with the opportunity to get some of that money back by qualifying for deductions and credits. QCDs on their own, with no original charitable intention, aren’t often talked about as “profitable” moves.
Here’s the simplest way to think about and plan a Qualified Charitable Distribution:
Step 1: Find your RMD amount for the year
This usually comes from your custodian and you can collect Form 5498 or a statement from the custodian which usually includes the RMD amount required.
Step 2: Decide how much you want to give
It could be:
- part of the RMD, or
- the entire RMD, or
- more than your RMD — as long as you’re within the QCD annual limit
Asking your custodian the maximum allowable is a good practice each year as the limits do update themselves and tax rules constantly change.
Step 3: Understand how the QCD changes your RMD for that year
There is an “order of operations” issue and it matters when the QCD is made in comparison to other withdrawals. Most individuals we have encountered want their QCD to fulfill their RMD requirement therefore they distribute through a QCD prior to taking money themselves.
This is an area where most individuals rely on their financial advisor or custodian for guidance as they will be the one typically controlling the process and transaction. Once money is distributed in a taxable nature, you normally can’t go back and treat it as a QCD for a later charitable distribution.
Helpful hint: Don’t wait until the last week of December
Custodians get extremely busy at year-end with everyone identifying year-end adjustments. If the QCD doesn’t clear / process in time for the tax year, it may not count for that year which can cause severe tax consequences.
Why Qualified Charitable Distributions can outperform “regular” charitable giving (especially after RMDs)
Most retirees don’t itemize every year. So if you take your RMD, deposit it, and then donate personally, the donation often becomes mostly a “feel-good” gift with little or no federal tax impact.
Even if you do itemize, the donation is still typically working below the line. The charitable contribution may reduce taxable income and have a similar tax effect, but it doesn’t reduce your Modified Adjusted Gross Income(MAGI) or AGI in the same clean way.
A QCD is different because it keeps IRA dollars from showing up in AGI and most definitions of MAGI. *You must be careful with MAGI as it has different definitions depending on the purpose.*
That matters because so many retirement “gotchas” are driven by income thresholds, not just your tax bracket.
The thresholds QCDs can help you manage
When AGI (or MAGI) rises, retirees often get hit in places they weren’t expecting:
1) Social Security taxation thresholds
Social Security doesn’t become taxable all at once. The taxable portion ramps up as “provisional income” increases (it really does behave like a dimmer switch).
If you aren’t aware how Social Security Income is taxed, we have another blog article walking through many of the principles here.
2) IRMAA (Medicare premium surcharges)
IRMAA is based on MAGI. With it, your Medicare premiums can act like a cliff: go $1 over a threshold, and your premium can jump for the year.
Lower AGI/MAGI makes it easier to stay out of those surcharge tiers. The frustrating part is the two-year lookback: a one-time income year can raise Medicare premiums later, when you’ve already moved on.
IRMAA is often a surprise as most people don’t understand how it works until they get a letter from the Social Security Administration. IRMAA is a large reason why choosing a QCD over a regular charitable distribution can save you thousands.
3) The new $6,000 senior deduction
This one is relatively new and might only exist for a short period of time but QCD planning is heavily encouraged for those in the phase-out of the new $6,000 senior deduction.
A lower MAGI while being in the phase-out window would allow you take a larger part of the deduction.
4) Other income-based thresholds retirees run into
The above aren’t the only reasons. Depending on your return, higher AGI/MAGI can also impact things like:
- eligibility for certain credits (less common in retirement, but it happens)
- how much of certain deductions phase out
- and even practical stuff like state-based benefit programs (if applicable)
A quick illustrative example of what QCDs can do
A married couple living in Florida, both 73 years old in 2025 have only federal income that would add up to $250,000. Let’s assume the IRMAA bracket threshold near $220,000 and has a cost of $1,500 per person.
- their RMD is $100,000
- they normally donate $40,000 each year
- they withdraw no additional money from the IRA than their RMD
Option A: Take the full RMD, then donate personally
- Their MAGI of $250,000 includes the full $100,000 RMD
- The donation helps as they now itemized.
- If they would not itemize without charitable contributions, only a portion would be deductible.
- In this example, the couple must pay the $3,000 in IRMAA surcharges and claim $0 of the $6,000 senior deduction.
Option B: Do a $40,000 QCD and take the remaining $60,000 as a taxable distribution
- $210,000 is their new MAGI
- Only $60,000 of the RMD shows up as taxable IRA income
- They avoid the $3,000 IRMAA surcharge and they recognize $2,400 of the new $6,000 senior deduction for both individuals.
When comparing Option A with Option B in this example, Option B creates a $4,056 tax win. When analyzing for the itemized versus standard deduction it could make it even larger. This is the reason that QCDs are valuable, we didn't change the end result of where money went, we just changed how it was transacted with.
Of course this situation exists in a vacuum, and other factors might apply but the example above identifies a large potential win if circumstances line themselves up properly. Not everyone will benefit from Qualified Charitable Contributions but understanding when you do can save a significant amount of tax dollars.
Reporting: why QCDs get missed even when done correctly
Your 1099-R may not scream “QCD”, and QCDs are often missed by tax preparers who are just entering the forms, not asking questions.
The key is making sure your tax prep process captures it properly and your documentation is clean.
What you should keep
- the custodian confirmation / transaction record
- the charity acknowledgment letter (especially for gifts $250+)
Common mistakes we see (and how to avoid them)
- Taking the distribution into your bank account first (usually disqualifies it as a QCD)
- Using a donor-advised fund as the recipient (often not allowed for QCDs)
- Waiting too late in the year and missing processing deadlines
- Assuming the 1099-R will clearly identify the QCD
- Not getting the acknowledgment letter from the charity
Wrap-up
Qualified Charitable Distributions aren’t a complicated strategy.
They’re just a clean way for aging individuals to give to charity. As you near the age of “forced income” once RMDs begin, QCDs can alleviate some of the tax burden.
If you’re trying to keep your retirement income stable, reduce surprises, and avoid Medicare premium cliffs, QCDs are one of the first tools worth checking.
Disclaimer
This article is for general informational and educational purposes only and is not tax, legal, or financial advice. The article is written from the perspective of a Florida individual where other states may have different laws. This article has not been updated since the date of writing. Links are provided to easily confirm where the information came from. Use it to help you ask better questions about your situation. For advice tailored to you, consult a qualified tax professional.
Author
Nathan Gauger is the Managing Partner of Blue Heron CPAs and focuses on retirement tax planning—helping retirees make confident decisions around Roth conversions, RMDs, Social Security timing, and Medicare-related costs like IRMAA. His goal is simple: make sure your tax plan supports the life you want in retirement, not just the return you file this year.
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