Make a Qualified Charitable Distributions Gift
Qualified Charitable Distributions (QCDs), also known as IRA Charitable Rollovers, are the savviest way for individuals age 70½ or older to use their IRAs to maximize their charitable impact.
What are Qualified Charitable Distributions?
Qualified Charitable Distributions (QCDs) are distributions from your Individual Retirement Account (IRA) made directly to a qualified nonprofit organization without having the distribution counted as taxable income.
QCDs are also sometimes referred to as IRA Charitable Rollovers.
Currently, up to $105,000* in IRA funds can be counted as QCDs annually. For married couples, each spouse can make QCDs up to the $105,000 limit for a potential total of $210,000.
* The amount that donors can give to charity via QCD will increase by a percentage in 2025 to account for inflation.
QCDs are also sometimes referred to as IRA Charitable Rollovers.
Currently, up to $105,000* in IRA funds can be counted as QCDs annually. For married couples, each spouse can make QCDs up to the $105,000 limit for a potential total of $210,000.
* The amount that donors can give to charity via QCD will increase by a percentage in 2025 to account for inflation.
Who is eligible?
If you are 70½ years of age or older and have a Traditional IRA, you are eligible to make a QCD.
What are the benefits?
QCDs can reduce your income taxes
Normally, funds that are distributed from a Traditional IRA are includible in your taxable income, which is likely to increase your overall tax burden. In some cases, this additional income may also move you into a higher tax bracket.
However, QCDs are an exception to this rule—funds go directly from your IRA to your chosen charitable organization without going to you first, thereby lowering your adjusted gross income and effectively reducing your income taxes.
QCDs can satisfy Required Minimum Distributions
Required Minimum Distributions (RMDs) are amounts that you must withdraw annually from your Traditional IRA once you’re eligible (as of 1/1/2023, the age to start taking RMDs increased from age 72 to age 73, with the exception of donors who turned 72 before January 1, 2023).
If you do not withdraw your RMD, you will face a penalty tax of 25% of the required withdrawal amount. QCDs can be used to meet this RMD requirement and avoid penalties. Read more about RMDs on the IRS website(opens in new window).
QCDs maximize your charitable impact
Because in most cases QCDs do not need to be recognized as income, charitable organizations receive the full amount of the transfer tax-free.
It’s a win-win situation that both supports you and the causes you care about.
Normally, funds that are distributed from a Traditional IRA are includible in your taxable income, which is likely to increase your overall tax burden. In some cases, this additional income may also move you into a higher tax bracket.
However, QCDs are an exception to this rule—funds go directly from your IRA to your chosen charitable organization without going to you first, thereby lowering your adjusted gross income and effectively reducing your income taxes.
QCDs can satisfy Required Minimum Distributions
Required Minimum Distributions (RMDs) are amounts that you must withdraw annually from your Traditional IRA once you’re eligible (as of 1/1/2023, the age to start taking RMDs increased from age 72 to age 73, with the exception of donors who turned 72 before January 1, 2023).
If you do not withdraw your RMD, you will face a penalty tax of 25% of the required withdrawal amount. QCDs can be used to meet this RMD requirement and avoid penalties. Read more about RMDs on the IRS website(opens in new window).
QCDs maximize your charitable impact
Because in most cases QCDs do not need to be recognized as income, charitable organizations receive the full amount of the transfer tax-free.
It’s a win-win situation that both supports you and the causes you care about.
The Circle for Children is a 501(c)(3) nonprofit organization.