Qualified Charitable Distributions: A tax-smart way to use your RMD for charitable giving

For families with substantial wealth, retirement assets may eventually serve a different purpose than originally intended. After decades of saving and investing, an IRA that was built to fund retirement may no longer be necessary to support your lifestyle. Instead, it becomes another asset to consider as part of your charitable and legacy planning.

Required minimum distributions (RMDs) can bring that planning decision into sharper focus. Once RMDs begin, you must withdraw a portion of your IRA each year, whether you need the money or not. Those distributions are generally taxed as ordinary income, which increases your adjusted gross income and can potentially have tax consequences that extend beyond the distribution itself.

If charitable giving is already part of your plans, a qualified charitable distribution, or QCD, may provide a more tax-efficient way to use those required distributions.

What is a qualified charitable distribution (QCD)?

A qualified charitable distribution (QCD) allows someone age 70½ or older to make a charitable gift directly from a traditional IRA to an eligible charity while excluding the distribution from taxable income. To make a QCD, you instruct your IRA trustee or custodian to transfer the funds directly from your IRA to a qualifying charitable organization. For 2026, the annual QCD limit is $111,000 per individual.

If you are subject to required minimum distributions (RMDs), a QCD can satisfy all or a portion of the year's required amount. You do not, however, need to be subject to RMDs to make a QCD; eligibility begins at age 70½, even if your RMDs do not begin until later.

The direct transfer is important to the tax treatment. The taxable distribution you receive from a traditional IRA is included in your ordinary income, even if you later donate those dollars to charity. With a QCD, the funds instead go directly from your IRA to the charitable organization and the distribution is excluded from your federal gross income. State tax treatment may vary.

Why use IRA assets for charitable giving?

If you have multiple sources of wealth, deciding which assets to use for charitable giving can be just as important as deciding how much to give. The assets you choose can affect your tax picture today as well as what you ultimately preserve for your beneficiaries.

Managing the tax impact today

The first consideration is how taking an RMD may affect your broader tax picture.

Because an RMD is included in your taxable income, it can increase your adjusted gross income. That increase may have other tax consequences, such as higher income-related Medicare Part B and Part D premiums. It can also affect how other income is taxed. For example, while an RMD is not itself subject to the 3.8% net investment income tax, the additional income may cause more of your investment income to be subject to the tax. This can become particularly relevant when you also have capital gains or income from investments, trusts, businesses or other sources.

Using a QCD to satisfy all or part of your RMD may help reduce the amount of your RMD included in your income and, in turn, limit some of these broader tax effects.

Preserving tax-efficient assets for your beneficiaries

If leaving assets to family is also part of your plans, using IRA assets for charitable giving may allow you to preserve other assets that could be more tax-efficient for your beneficiaries to inherit.

Beneficiaries who inherit a traditional IRA generally pay ordinary income tax as they take distributions. Many non-spouse beneficiaries must also fully distribute the account within 10 years following the original owner's death, although exceptions apply for certain beneficiaries. This can be particularly important if those distributions add taxable income during your beneficiaries' peak earning years.

By contrast, inheriting assets from a taxable investment account generally does not create taxable income for the beneficiary. In addition, under current federal law, certain appreciated assets held in taxable accounts may receive a step-up in cost basis to their fair market value at death, potentially reducing the capital gains tax your beneficiaries would owe if they later sell those assets.

Using IRA assets for charitable giving can therefore help you support the organizations you care about while potentially preserving more tax-efficient assets for your family.

When might a QCD make sense?

The strategy may be particularly relevant if you:

• Are at least age 70½ and have an IRA that qualifies for QCDs
• Regularly support qualified charitable organizations
• Are subject to RMDs but do not need the full amount to support your spending
• Have other significant sources of taxable income
• Want to preserve other assets that may be more tax-efficient for your beneficiaries to inherit

Because eligibility and tax treatment depend on individual circumstances, it is important to coordinate with your IRA custodian and tax advisor before initiating the transfer.

Rules to know before making a QCD

A QCD must meet certain requirements to be excluded from your taxable income. The distribution must come directly from an eligible IRA and go directly to a qualifying charity. An inherited IRA may also qualify, provided the beneficiary making the distribution meets the age requirement.

QCDs cannot be made directly from employer-sponsored retirement plans, such as 401(k), 403(b) and 457(b) plans, and restrictions apply to certain SEP and SIMPLE IRAs. Donor-advised funds, supporting organizations and most private foundations are also generally not eligible to receive QCDs.

You should obtain written acknowledgment of your gift from the charity and cannot receive goods or services in return. Because a QCD is excluded from income, you also cannot claim the same amount as a charitable deduction.

Put your IRA to work for what matters most

A QCD can turn a required distribution into an opportunity to support organizations that matter to you while being more intentional about the assets you preserve for your family or other goals. When charitable giving is part of your broader wealth plan, how much you give is only part of the equation. Which assets you use can matter, too.