The QCD Explained: A Tax-Smart Way to Give From Your IRA

The QCD is a big deal. If you’re over 70½ or planning for the day you will be, don’t wait another day to understand how this strategy can work for you.

A Qualified Charitable Distribution (QCD) allows IRA owners aged 70½ or older to transfer funds directly from their IRA to a qualified charity using pre-tax dollars without adding to their taxable income. This strategy can help satisfy required minimum distributions (RMDs) and reduce income taxes, making it one of the most tax-efficient ways for retirees to give. Understanding how QCDs work and how to report them correctly is key to maximizing their benefits.

Here’s what you need to know about QCD: how it works, key rules, tax benefits, contribution limits, and the IRS reporting change coming in 2025.

What Is a QCD?

A QCD is a transfer of funds from an IRA to a qualified public charity. To use this strategy, you must be at least 70½ years old, and the distribution must be made payable directly to the charity. The IRA custodian can send the check directly to the charity, or they can mail the check (payable to the charity) to you so you can deliver it.

Some IRA custodians also offer checkwriting features that allow you to write a check directly from your IRA to the charity. When used correctly, this can qualify as a QCD, but it’s critical that the check clears the IRA account by December 31 of the tax year to count toward that year’s required minimum distribution (RMD) and ensure it’s excluded from taxable income. Always check with your custodian to understand their specific rules and timelines for IRA checkwriting.

This is not the same as withdrawing money yourself and writing a personal check to the charity, which would not qualify as a qualified charitable distribution.

The appeal of this strategy is that it moves money from your pretax IRA to charity without adding to your taxable income. A QCD also counts toward satisfying your RMD if you are required to take one. This is a big deal as RMDs can cause a hidden tax bomb for those who have planned their retirements with conservative assumptions. 

Now that you understand what a QCD is and why it’s so valuable, let’s address a common question about whether it’s deductible.

Are QCDs Tax Deductible?

A QCD does not offer a separate tax deduction, but the donated amount is excluded from your taxable income. This exclusion often provides a more valuable tax benefit than a regular charitable deduction because it reduces your adjusted gross income (AGI). Lowering AGI can help reduce income taxes and may also lower Medicare premiums, reduce the taxable portion of Social Security benefits, and improve eligibility for certain credits or deductions.

Unlike regular charitable gifts, which only reduce taxes if you itemize deductions, QCDs provide a benefit even if you take the standard deduction, which many retirees use. This makes QCDs an especially attractive strategy for charitable giving in retirement.

Keep in mind that it’s important to keep proper documentation, including records from your IRA custodian and acknowledgment letters from the charities you support, in case the IRS requests verification.

Who Can Use a QCD

QCDs allow individuals age 70½ and older to make tax-free donations directly from an IRA to a qualified charity. This strategy is especially helpful for retirees with large balances in tax-deferred accounts, where required minimum distributions (RMDs) begin at age 73 or 75, depending on birth year. Importantly, you can start making qualified charitable distributions once you reach age 70½, even if you are not yet required to take RMDs.

Larger account balances usually lead to larger RMDs, which can push retirees into a higher tax bracket and increase their overall tax burden. By using a QCD, you can reduce the size of your RMD that counts as taxable income, which helps lower your adjusted gross income and manage the impact of rising RMDs as you age.

Account Types Eligible for a QCD

Qualified Charitable Distributions (QCDs) can only be made from IRAs — not from workplace retirement plans. Eligible accounts include:

• Traditional IRAs
  
• Inherited IRAs
  
• SIMPLE and SEP IRAs (but only if the account is inactive, meaning no ongoing contributions)
  

It’s important to note that QCDs cannot be made directly from workplace plans like 401(k)s, 403(b)s, or 457(b)s. If you want to use IRA funds for charitable giving through a QCD, the assets must be held in one of the eligible IRA types listed above.

QCDs From Inherited IRAs

Many people are surprised to learn that QCDs can also be made from inherited IRAs, providing a valuable tax-saving tool for beneficiaries. However, the key eligibility requirement is that the beneficiary must be age 70½ or older. It’s the beneficiary’s age, not the original account owner’s, that matters.

If you inherit an IRA and are under age 70½, any distributions will be taxable income, and you won’t be eligible to make a QCD. You can still donate the proceeds to charity, but you would need to claim the gift as an itemized deduction, assuming you itemize.

For eligible beneficiaries, a QCD from an inherited IRA works just like one from your own IRA:

• You can give up to the annual QCD limit ($108,000 in 2025, adjusted annually for inflation)
  
• The distribution is excluded from taxable income
  
• It can help satisfy required minimum distributions (RMDs) on the inherited account

QCD Rules and Limits

For tax year 2025, you can donate up to $108,000 directly from your IRA to qualified charities, and for years beyond that the limit will be adjusted for inflation. This $108,000 limit applies per individual, across all IRAs and charities combined. For married couples filing jointly, each spouse can use their own $108,000 limit if they have separate IRAs, allowing for up to $216,000 in combined QCDs.

There is also a special one-time election, introduced under SECURE 2.0, allowing up to $54,000 in 2025 to be transferred to a charitable remainder trust (CRT) or charitable gift annuity (CGA). This one-time gift counts toward the overall QCD limit and must be irrevocably elected.

Can I Do a QCD to My Donor-Advised Fund (DAF)?

A common question that comes up with QCDs is whether you can direct them to your donor-advised fund (DAF).

The short answer is no: QCDs cannot be made to DAFs.

Although DAFs are a great giving tool, QCDs are not allowed because you retain advisory control over the funds. To qualify as a QCD, the donation must be made payable directly to a qualified public charity that is a 501(c)(3) organization and does not give the donor control or input over the funds.

If you want to support causes you care about through a qualified charitable distribution, you will need to make the gift directly to the operating charity. If you want to fund a DAF or a private foundation, you would need to take a regular taxable distribution from your IRA and potentially claim an itemized charitable deduction if you qualify.

How to Do a QCD

Once you understand the benefits of a QCD, the next step is knowing how to carry it out correctly. Here’s a simple guide to make sure your QCD is handled smoothly and meets IRS requirements:

1. Check Your Eligibility: Although this may seem obvious, you need to confirm that you are age 70½ or older at the time the distribution is made. Simply turning 70½ during the calendar year is not enough. For reference see IRS Publication 590 (page 13). 
2. Select a Qualified Charity: The charity must be a 501(c)(3) public charity eligible to receive tax-deductible donations. QCDs cannot go to donor-advised funds, private foundations, or supporting organizations. You should always check before making a gift to make sure the organization is qualified to accept QCDs.
3. Contact Your IRA Custodian or Financial Advisor: Reach out to your IRA custodian or financial institution and tell them you want to make a qualified charitable distribution. Request the proper form or instructions to set up the transfer.
4. Direct the Payment Properly: The IRA custodian must make the distribution payable directly to the charity. The check can either be sent directly to the charity or mailed to you (payable to the charity) so you can deliver it. Do not withdraw the funds yourself and write a personal check — this will not qualify as a QCD.
5. Notify the Charity: Let the charity know to expect the donation from your IRA so they can properly acknowledge the gift for your records.
6. Keep Documentation: Save the IRA statement showing the distribution, and get a written acknowledgment from the charity. You will need both to properly report the QCD on your tax return.
7. Report It on Your Tax Return: Even though QCDs are excluded from taxable income, you still must report the distribution on your tax return. Starting in 2025, custodians will use Code Y on Form 1099-R, but you should continue to note the QCD amount and keep documentation.

Once you understand the rules, the real magic is seeing how QCDs can work in practice. Here’s an example.

Scenario Comparison

A QCD lowers adjusted gross income directly, not as a deduction. This helps even those who use the standard deduction and can reduce taxable Social Security.

Note: All tax estimates are approximate and based on 2025 federal tax brackets. Actual outcomes may vary depending on other income sources, deductions, credits, or state taxes. Taxable Social Security is determined using provisional income, calculated as AGI (excluding Social Security) + ½ Social Security + tax-exempt interest. By lowering AGI through a QCD, couples may reduce the taxable portion of their Social Security benefits.

If you’d like to see how a QCD strategy could impact your own situation, be sure to speak with a qualified tax advisor.

How QCD Reporting Worked Before 2025

Historically, the 1099-R form from your IRA custodian reported the total distribution, including the QCD, with no special code to identify the charitable portion. Taxpayers had to report the total on Form 1040, subtract the QCD on line 4b, and write “QCD” next to the line. Without proper reporting, many taxpayers overpaid taxes by failing to subtract the QCD amount. It was critical to keep documentation such as custodian statements and charity acknowledgment letters.

What Is Changing in 2025

Starting with 2025 distributions, the IRS will introduce a new Code Y in Box 7 of the 1099-R to identify QCD amounts. While this change is designed to make reporting easier and reduce filing errors, it is still unclear how consistently IRA custodians will apply this code, if at all. Because of this, it will remain essential for taxpayers to keep proper documentation and communicate with their tax advisor to ensure QCDs are reported correctly on their tax return.

Making the Most of QCDs in Your Retirement Plan

A Qualified Charitable Distribution is more than just a tax break, it’s a thoughtful way to align your wealth with your values while managing your retirement income wisely. By using the QCD, you can reduce taxable income, potentially lower Medicare premiums, and limit the taxation of Social Security, all while supporting the things you care about. 

As with any tax strategy, it’s smart to plan ahead and work with a trusted tax or financial professional to make sure your giving approach fits your overall retirement plan and complies with the latest IRS rules.