Giving with Purpose: How Qualified Charitable Distributions Can Make a Difference

What if your retirement income could do more than support your lifestyle? What if it could help support the causes you care about? 
As retirees seek both financial efficiency and social impact, Qualified Charitable Distributions (QCDs) have become a valuable strategy. According to the Internal Revenue Service (IRS), individuals aged 70½ or older can donate up to the federally allowed amount (adjusted for inflation; $108,000 in 2025) directly from an IRA to a qualified charity, excluding that amount from taxable income (1). 
In a climate where Required Minimum Distributions (RMDs) can push retirees into higher tax brackets, this approach can help lower taxable income while supporting meaningful causes. The question is: could your RMD work harder for your values? 

Understanding the QCD Advantage 

A Qualified Charitable Distribution is a direct transfer of funds from an Individual Retirement Account (IRA) to a qualified nonprofit. Unlike a typical withdrawal, where income taxes apply, the donated amount through a QCD is excluded from your adjusted gross income (2). 
To qualify: 

• You must be at least 70½ years old at the time of the transfer (2). 

• The distribution must go directly from your IRA custodian to the charity (2). 
• Only IRAs qualify; 401(k)s and 403(b)s are not eligible (2). 
• The annual limit per person is $108,000 in 2025, indexed for inflation (3). 

Even if you don’t itemize deductions, your charitable transfer may help lower taxable income, potentially reducing the impact on Social Security benefits and Medicare premiums (4). 

Strategic Giving: When and Why It Makes Sense 

For retirees who no longer need their full RMD for living expenses, a QCD can be a purposeful and tax-efficient strategy. It can: 

• Satisfy annual RMD requirements while potentially lowering taxable income (5). 
• Support 501(c)(3) organizations directly from pre-tax dollars (1). 
• Enhance tax efficiency by helping reduce exposure to higher income brackets (4). 

For example, if your RMD is $30,000 and you transfer $10,000 to a qualified charity through a QCD, you’ll only owe taxes on $20,000, meeting your RMD while potentially lowering taxable income (1). 
This structure may allow charitable intent and tax strategy to align without the added steps of creating a private foundation or donor-advised fund (6).  

Common Mistakes to Avoid 

Even with its advantages, QCDs must follow IRS rules to remain tax-qualified: 

• Wrong account type: Only IRAs qualify, not employer-sponsored plans (2). 

• Indirect transfers: You can’t take the funds personally first; they must go directly to the charity (1). 

• Ineligible charities: Donor-advised funds and private foundations generally don’t qualify (4). 
• Missed deadlines: QCDs must be completed by December 31 of the tax year to count toward your RMD (1). 

Always ensure your IRA custodian issues Form 1099-R reflecting the transaction, and note the QCD on your tax return (2). 

Building a Charitable Legacy 

A QCD is one of several tax-efficient charitable strategies. Others include donor-advised funds, appreciated stock donations, and cash contributions—each with distinct potential benefits (1)(4). 
For example: 

• QCDs exclude income entirely (2). 
• Stock donations can help avoid capital gains tax (4). 
• Cash gifts may allow a deduction if you itemize (4). 

By integrating QCDs into your broader retirement income or estate approach, you can help ensure your giving aligns with both your values and financial goals—today and over time (1).  

Finding Intention and Efficiency 

A Qualified Charitable Distribution can offer a balance of purposeful giving and tax-aware strategy. It’s not about how much you give; it’s about giving with intention and efficiency. 
So ask yourself: could your RMD change more than just your tax line?
If you’re exploring charitable giving options, a financial professional can help you explore ways to coordinate your QCDs within your broader income, estate, and legacy strategy. Schedule a complimentary conversation to learn more about how your charitable goals can work in harmony with your financial future. 
 
Sources: 
(1) Qualified Charitable Distributions: Your Guide to Tax-Efficient Giving. 2025, pp. 1–6. 
 (2) Internal Revenue Service. Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs). Updated 2025. 
 (3) Internal Revenue Service. Notice 2024-75: Inflation Adjustments for Qualified Charitable Distributions. 2024. 
 (4) Internal Revenue Service. Publication 526: Charitable Contributions. Updated 2025. 
 (5) Tax Policy Center. “How Do Qualified Charitable Distributions Work?” Tax Policy Brief, 2024. 
 (6) U.S. Securities and Exchange Commission (SEC). “IRA Withdrawals and Charitable Giving.” Investor.gov, 2024. 
This material is for informational purposes only and is not intended as legal, tax, or investment advice. Consult your tax professional or financial professional regarding your specific situation.

If you are considering an estate or legacy strategy, these should be developed in conjunction with a qualified estate planning attorney.