Philanthropy Series Part Two - Qualified Charitable Distributions (QCDs): Direct Giving from Your Trail Fund

There’s something deeply satisfying about reaching a summit and knowing you’ve packed exactly what you need—nothing more, nothing less. No wasted weight or unnecessary baggage. Everything serves a purpose.

Qualified Charitable Distributions (QCDs) can help your retirement income work in a similar way. For retirees who want to give back without overcomplicating their tax situation, QCDs offer a direct, efficient path—what I like to think of as a trail-ready giving strategy.

Let’s unpack how they work, when to use them, and how they can become a meaningful part of your financial and philanthropic plan.

What Is a Qualified Charitable Distribution (QCD)?

A QCD enables those who are 70.5 and older to transfer funds directly from their traditional IRA to a qualified charitable organization. Up to $108,000 (for 2025) can be given annually per person.¹ 

Unlike standard IRA withdrawals, which are taxed as ordinary income, QCDs don’t increase your taxable income or trigger additional taxes on Social Security or Medicare premiums. And while charitable donations usually require itemizing to get a deduction, QCDs bypass that step entirely. You get the tax benefit whether you itemize or not, making it a more ideal option for retirees who usually take the standard deduction but still want their charitable giving to yield some tax advantages.

Using QCDs to Satisfy Your Required Minimum Distributions

Once you hit age 73, the IRS requires that you begin taking Required Minimum Distributions (RMDs) from your IRA, 401(k), and other tax-deferred retirement accounts. Unfortunately, you’ll need to withdraw the funds and meet the minimum requirement, whether you need the money or not. These distributions are taxed as ordinary income, which means they may push your annual income higher—resulting in larger tax bills and potentially impacting Medicare premiums.

But for those who already plan on giving charitably in retirement, a QCD can actually address two goals (charitable giving and tax reduction) with one solution. QCDs count towards your RMDs for the year, meaning you can essentially donate some or all of your RMDs and reduce (or even eliminate) the tax burden they create.

Be Mindful of QCD Timing

Because QCDs must be completed within the calendar year to count toward that year’s RMD, timing is key. If you’ve already taken RMDs from your IRA in cash, you can’t retroactively apply it as a QCD. For this reason, you may find it helpful to plan ahead and decide early on in the year if QCDs make sense for you and your charitable giving goals.

Another important piece of housekeeping? The funds must go directly from your IRA custodian to the charitable organization. If the distribution passes through your hands (say a check is made out to you), it no longer qualifies.

If you're married, both spouses can contribute up to the annual limit each year ($108,000 for 2025) from their own IRAs, which opens the door for some significant giving and tax saving opportunities.

Who Should Consider a QCD?

A QCD is best used by someone who owns an IRA, is over 70.5, and doesn’t need to use their RMDs to cover their living expenses. It can be especially appealing for those with larger IRA balances, as it can reduce your account size over time—lowering future RMDs and potentially easing your future tax burden.

It may also be an ideal solution for those who want to support their favorite causes in a steady, sustainable way. Like a trail marker, you can use your RMDs to guide your giving strategy each year.

Do QCDs Make Sense Within Your Giving Strategy?

For many retirees I work with, QCDs are a simple, tax-efficient way to align their values with their retirement income landscape. If you're already giving or planning to give as part of your retirement plan, QCDs can be an especially efficient strategy to consider.

As always, if you’d like help navigating your options or understanding how QCDs might fit into your broader giving and retirement strategy, I’d be happy to walk through it with you. 

Sources:

¹http://www.irs.gov/publications/p590b