What Is a Qualified Charitable Distribution (QCD)?

What Is a QCD?

A QCD is a direct transfer of funds from your IRA to an eligible public charity. A QCD is different from a regular IRA withdrawal. A regular withdrawal counts as taxable income. But a QCD does not count towards your Adjusted Gross Income (AGI).

You can donate to charity without raising your taxable income. This is significant for retirees. It can help with managing tax brackets, Medicare premiums, and eligibility for certain credits.

QCD rules and limits

The maximum annual QCD limit in 2025 is $108,000 (increasing to $111,000 for 2026), indexed for inflation. This cap applies to each person. So, married couples who each have their own IRA can double the amount by making a QCD from their respective IRAs. 

To qualify:

• You must be age 70½ or older at the time of the distribution.
• Funds must come from a traditional IRA or an inherited IRA (if the beneficiary-owner meets the age requirement). SEP and SIMPLE IRAs may also qualify if inactive.
• The donation must go directly to an IRS-recognized public charity. Contributions to donor-advised funds, private foundations, or supporting organizations do not qualify.

Required minimum distribution and QCD

One of the most appealing aspects of a QCD is that it can count toward your Required Minimum Distribution (RMD). Once you reach age 73, the IRS mandates that you withdraw a certain amount from your IRA each year. These withdrawals are typically taxable, but a QCD satisfies the RMD requirement without adding to your taxable income.

Tax advantages of QCDs

Charitable contributions are usually claimed as itemized deductions on Schedule A of your tax return. The Tax Cuts and Jobs Act of 2017 nearly doubled the standard deduction. As a result, fewer taxpayers itemize their deductions.

This change makes it harder to benefit from traditional charitable deductions. QCDs solve this problem by offering an above-the-line benefit and reducing your AGI directly rather than relying on itemization.

Why lowering AGI matters:

• Avoid pushing yourself into a higher tax bracket.
• Reduce exposure to the Net Investment Income Tax.
• Potentially lower Medicare Part B and D premiums.

Unlike itemized deductions, QCDs are not subject to the typical 30% or 50% AGI limits on charitable contributions. This makes them especially attractive for high-income taxpayers or those with large IRAs.

QCD Anti-Abuse Rules

SECURE Act QCD changes introduced new complexities. Previously, individuals could not contribute to a traditional IRA after age 70½. That restriction is now gone, so you can keep contributing if you have earned income. This change is good, but it created a loophole. Taxpayers could put money into an IRA, claim a deduction, and then quickly make a QCD, thereby getting a double benefit.

To prevent this, the law now requires tracking of post-70½ deductible contributions. If you’ve made deductible IRA contributions after reaching 70½, your QCDs may be partially disqualified until those contributions are offset. The IRS treats these disqualified amounts, called “rejected QCDs,” as taxable income.

However, you can still claim them as itemized charitable deductions. Once your cumulative post-70½ contributions are reduced to zero, full QCD benefits resume.

How to make a QCD

Executing a QCD isn’t as simple as writing a check. The transfer must go directly from the financial institution where you have your IRA to the charity. If you withdraw funds and then donate them, the distribution will be taxable.

Best practices:

• Plan ahead for year-end deadlines. QCDs must clear by Dec. 31 to count for that tax year.
• Keep documentation. Obtain a written acknowledgment from the charity for your records.
• Avoid donor-advised funds. You cannot direct QCDs to DAFs, private foundations, or certain supporting organizations.
• Coordinate with your wealth advisor. If you are thinking about Roth conversions or other tax moves, QCDs can help manage your AGI in high-income years.

Getting started

At Mercer Advisors, we approach QCDs as more than charitable tax strategies for retirees — they’re an opportunity to align your financial plan with your values. Our team of wealth advisors and specialists can help you integrate QCDs into a comprehensive wealth management plan. This can help ensure you maximize tax benefits with QCDs while supporting the causes you care about. From navigating IRS rules to coordinating with your IRA provider, we offer tailored guidance every step of the way.