If you are age 70½ or older and charitable giving is one way you put your values into action, a qualified charitable distribution is one option to discuss with your advisor. It lets you support causes you care about directly from your IRA, but you must follow specific rules. A good place to begin is with how it works.
What Is a Qualified Charitable Distribution (QCD)?
A qualified charitable distribution (QCD) lets you give money directly from your individual retirement account (IRA) to an eligible charity once you are at least age 70½. Instead of withdrawing the money yourself and then making a gift, your IRA custodian sends the funds directly to the charity. When you meet the IRS requirements, that amount is generally not included in your taxable income.
That is what makes a QCD different from taking a regular IRA withdrawal and then writing a check to a charity. A regular withdrawal is generally included in your income first. Depending on your other income for the year, additional IRA withdrawals may also affect your overall tax situation and, in some cases, push you into a higher tax bracket.
For donors who take the standard deduction, a qualifying QCD is treated differently from an ordinary charitable gift because its federal income-tax treatment does not depend on itemizing a charitable deduction.
Whether a QCD makes sense for you depends on your IRA, your income, and your overall financial picture. Your financial advisor or tax professional can help you weigh those factors. You can also review the general rules in the IRS’s Publication 590-B.
This article provides general educational information and is not intended as tax, legal, or financial advice. QCD rules can change, and individual circumstances vary. Donors should consult their tax, legal, or financial advisor and IRA custodian before making a distribution.
Who Qualifies for a QCD, and How Much Can You Give?
An IRA owner generally becomes eligible to make a QCD at age 70½, as long as the money comes from an eligible IRA and goes directly to a qualified charity. Each eligible donor can give up to an annual limit set under federal tax law.
The Age Requirement
You must be at least 70½ on the date the distribution is made. Turning 70½ later in the same calendar year does not make an earlier distribution eligible as a QCD.
The QCD age is also different from the age when required minimum distributions (RMDs) begin. Congress has raised the RMD starting age in recent years, but the QCD age has remained 70½. That means some IRA owners may be able to make QCDs for several years before they are required to take RMDs.
Eligible Accounts
Traditional IRAs are the most common source of QCDs. A beneficiary of an inherited IRA may also be able to make a QCD once they have reached age 70½.
Employer retirement plans such as 401(k) and 403(b) accounts generally do not qualify. SEP and SIMPLE IRAs may qualify only in certain situations. Because eligibility can depend on the type and status of the account, it is a good idea to confirm the details with your IRA custodian and advisor before requesting a distribution.
The Annual Limit
Each IRA owner has their own QCD limit for each tax year. Married couples who each own an IRA and each meet the age requirement may each make QCDs from their own accounts, up to the applicable individual limit. If you give more than the allowable QCD amount, the excess is generally treated as a regular IRA distribution rather than a QCD. Because the annual limit adjusts for inflation, confirm the current amount with your tax advisor or the latest IRS guidance before planning a gift.
How a QCD Works, Step by Step
To make a QCD from an IRA, you ask your IRA custodian to send a distribution directly to a qualified charity, and the charity provides a written acknowledgment of the gift. The steps below describe the general process. Custodians handle requests differently, so it helps to check with your account provider first.
- Talk with your advisor. Before requesting a distribution, review with a financial advisor or accountant whether a QCD fits your broader tax and estate plans, and confirm that your age and account type meet the requirements.
- Choose a qualified charity. Confirm that the organization is eligible to receive tax-deductible contributions and that it can accept a QCD. Some charitable organizations that accept deductible gifts cannot receive QCDs. Ask the charity for its legal name, federal tax identification number, and the address to send gifts to. The IRS tool can help verify an organization’s status.
- Request the distribution. Use your custodian’s QCD request process so the check or transfer is made payable to the charity, not to you. Money paid to you first generally cannot count as a QCD. Some custodians offer IRA checkbooks for this purpose.
- Plan around year-end. A QCD generally needs to be completed by December 31 to count for that tax year. Custodians and charities may both need lead time, especially in the last weeks of the year.
- Keep a written acknowledgment. The charity should confirm the amount and date of the gift in writing and state that you received no goods or services in exchange.
- Report the gift on your tax return. Your IRA custodian will report the distribution to the IRS. Let your tax preparer know that the distribution was intended as a QCD so it can be reported correctly.
Common Questions Advisors Get About QCDs
Advisors often hear the same questions once a client decides to give from an IRA. The answers below describe the general IRA charitable distribution rules. A client’s own circumstances may change how they apply.
Can a QCD go to a donor-advised fund?
No. Federal law does not allow a QCD to fund a donor-advised fund, including a DAF held at a community foundation. Supporting organizations and most private foundations are also excluded, even though they are charitable organizations that can accept other deductible gifts.
A client who holds a DAF can still make a QCD directly to an eligible charity, or to another type of charitable fund that qualifies. The organization receiving the gift can confirm which of its funds may be eligible.
Does a QCD count toward a required minimum distribution?
A QCD may count toward all or part of a client’s required minimum distribution for the tax year. Withdrawals taken earlier in the year count toward the requirement first, which can affect how much of a later QCD applies to it. An advisor can help plan the order of distributions.
Can the donor also claim a charitable deduction?
No. Because a QCD is generally excluded from taxable income, the same amount cannot also be claimed as a charitable tax deduction.
Can the donor receive anything in return?
Generally not. The donor cannot receive goods or services in exchange for a QCD, such as event tickets or a benefit dinner. If a donor receives a benefit, the distribution may not qualify. For that reason, it helps to keep QCDs separate from event registrations and sponsorships and to handle those charitable gifts another way.
Can a QCD fund a charitable remainder trust or gift annuity?
Federal law allows a one-time election to make a QCD to certain split-interest arrangements, including a charitable remainder unitrust (CRUT), a charitable remainder annuity trust (CRAT), or a charitable gift annuity. This option has a lower cap that counts toward the donor’s annual QCD limit and its own conditions. These arrangements carry legal requirements beyond the scope of this guide, so clients considering one should work with their attorney.
How to Make a QCD to a Local Cause
If you want your QCD to support the greater Pottstown region, start by choosing a local charity and confirming that it is eligible to receive the distribution. From there, your IRA custodian can send the money directly to the organization. Because not every charitable organization qualifies for a QCD, it is worth checking before you begin the transfer.
Pottstown Regional Community Foundation can receive QCDs for eligible charitable purposes, but federal law does not allow QCDs to be contributed to donor-advised funds. Before initiating a QCD to PRCF or a PRCF fund, contact the Foundation to confirm that the intended fund is eligible and to obtain the correct transfer information.
Pottstown Regional Community Foundation can also be a resource as you think about where you want your giving to make a difference. Since grantmaking began in 2004, the Foundation has awarded more than $59.8 million in grants to nonprofits, schools, municipalities, and grassroots organizations throughout the region. Its service area extends about 10 miles around Pottstown and includes parts of western Montgomery, northern Chester, and eastern Berks counties. You can see the full area on the Foundation’s service area map.
That local experience gives the Foundation a broad view of the organizations and needs across the region. Donors and their advisors can contact the Foundation to discuss local giving goals and explore the options that may fit them. Advisors can also visit the Foundation’s Professional Advisors page for additional charitable planning resources.
For more background, read What Is a Community Foundation? You can also explore the Foundation’s ways to give and available fund types.
Planning a QCD as Part of Your Giving
A qualified charitable distribution can be a practical way to use retirement assets for charitable giving while keeping the transfer separate from a regular IRA withdrawal. For some donors, it can also help satisfy part or all of a required minimum distribution. Because QCD rules are specific, timing and account details matter. Before making a transfer, make sure the distribution is structured correctly and meets the current IRS requirements.
If you want your charitable giving to benefit the greater Pottstown region, the Foundation can help you learn more about local organizations, community needs, and ways to direct your support.
Frequently Asked Questions
Who is eligible for a QCD?
An IRA owner, or the beneficiary of an inherited IRA, may be eligible once they are at least 70½ on the date of the distribution. The gift must come from an eligible IRA and go directly to a qualifying charity.
Can a QCD go to a donor-advised fund?
No. A QCD cannot be used to fund a donor-advised fund, including one held at a community foundation.
How much can I give through a QCD?
Each qualifying IRA owner may give up to an annual limit for each tax year, set by federal law and adjusted for inflation. Confirm the current figure with a tax advisor or through IRS guidance.
Invest in Your Community
At Pottstown Regional Community Foundation, we’re dedicated to improving quality of life across the greater Pottstown region. We help donors give in ways that really make a difference and award grants to local organizations. The Foundation also funds and leads programs that serve our community. Contact us today to learn how we can work together.
