Make a difference that benefits both you and the causes important to you: use your RMD (Required Minimum Distribution) to make charitable donations.
Your annual RMD withdrawals are taxed at the ordinary income tax rate, sometimes pushing your annual income into a higher tax bracket and thus causing retirement concerns.
The Qualified Charitable Distribution (QCD) rule is a strategy that allows traditional IRA owners to deduct their RMDs on their tax returns if they donate the money to a charity or a non-profit organization. This donation effectively manages your income taxes by lowering your Adjusted Gross Income (AGI). (Note: the IRS puts a $108,000 limit on the total distribution for the 2025 tax year.1:
Here's how it works: Once you decide to make a QCD, you choose a charity that qualifies as a charitable organization under IRS rules. Let your IRA custodian know your intention to donate your distribution and the amount you'd like. The custodian will then send a check to the charity on your behalf. It's important to remember that QCDs must be made directly from your IRA oryou may lose the benefit of the donated distribution.1,2
You should consider using the QCD rule if you:
- Would like your RMD to benefit another organization
- Want to support an approved charity rather than a foundation
- Want to make a larger donation than you could in cash3
This approach can provide some tax relief while helping fulfill your philanthropic goals.
Consider speaking to a tax, legal, or accounting professional before modifying your charitable giving strategy.
Questions? Schedule a meeting with Nan & Jonathan!
- IRS.gov, 2024
2. The Internal Revenue Service has specific rules and guidelines for charitable contributions. Before taking any specific action, be sure to consult with your tax professional.
3. Once you reach age 73, you must begin taking the required minimum distributions from a traditional IRA in most circumstances. Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Contributions to a traditional IRA may be fully or partially deductible, depending on your adjusted gross income.