Introduction
Qualified Charitable Distributions are a win-win scenario for those who are charitably inclined. With a Qualified Charitable Distribution or QCD, you can donate to charity and lower your tax bill.
From this article, you’ll learn what QCDs are, how they work, their benefits, and some common pitfalls to avoid.
Key Takeaways
What Are Qualified Charitable Distributions (QCDs)?
A QCD is a tax planning strategy which allows for tax-free distributions from a Traditional IRA if the funds are donated to a qualified charity.
If you have a traditional IRA, the assumption is that it’s all pre-tax money. Those dollars have grown over the years without capital gains taxes or income taxes. That is known as tax-deferred growth.
However, at some point, you’re going to need to pull money out. Usually, that’s around age 73 when you have Required Minimum Distributions or RMDs. Those born 1960 or later begin RMDs at age 75.
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How a Qualified Charitable Distribution works
The charity receives the same gift. You owe no income tax on the distribution. And it counts toward your RMD.
For educational purposes only. Not tax or legal advice. Consult a qualified tax professional for your specific situation.
Eligibility Requirements
You must be at least 70 ½. Unlike other IRS age requirements, it is not based on the year you turn that age. Instead, Qualified Charitable Distributions are not permitted until you’ve had your 70 ½ birthday.
The distribution must come from an IRA (pre-tax).
The charity must be a “qualified” charity rather than a Donor Advised Fund or private foundation.
The QCD limit is $111,000 per taxpayer, per year in 2026.
Benefits of QCDs
Reduces Taxable Income:
When you pull money out of a Traditional IRA, it’s going to be taxable. For example, if you distribute $10,000, the IRS sees that as $10,000 worth of income that must be included on your tax return. That’s in addition to other income from wages, self-employment, investments, pensions, and annuities etc.
Counts Toward Your Required Minimum Distribution:
Required Minimum Distributions (RMDs) typically begin at age 73. This is when the IRS forces you to start withdrawing a portion of your pre-tax money each year. As you might guess, those amounts are included in your taxable income.
However, if you take your RMD as a QCD, the IRS does not consider that as taxable income. It’s an outstanding way to make your RMD tax-free.
You need to be careful with the timing. The IRS has a “first dollars out” rule. If you pull funds from an IRA to satisfy your RMD, you can’t designate it a QCD once it’s done. This is not to be confused with FIFO rules for Roth IRAs. While it’s similar in concept, it applies to different situations.
Consider this example: Your RMD is $10,000 for the year. In February, you take $10,000 out of your IRA. Later in the year, you learn about the tax benefits of a QCD. Unfortunately, it’s too late for the RMD.
You’re going to receive a 1099-R and it will be included in your taxable income. You can still do the QCD, but you’re not going to offset the required amount that you took out earlier in the year.
Increases Deductible Medical Expenses:
Medical expenses can be claimed as an itemized deduction. However, the deduction is limited to expenses that exceed 7.5% of Adjusted Gross Income or AGI. Utilizing a QCD could result in lower AGI which is used to determine the portion of medical expenses that are NOT deductible. This has the effect of increasing the amount of the medical expense deduction to further reduce taxable income.
Reduces Medicare Part B and D Premiums:
Medicare premiums are based on your taxable income. If your income is over a certain amount you are subject to IRMAA. This stands for Income Related Monthly Adjustment Amount and it catches many retirees by surprise.
This is especially the case when RMDs start. Unlike regular tax brackets, you only need to be one dollar over to be subject to the full IRMAA surcharge for Medicare premiums.
Careful planning with Qualified Charitable Distributions can help avoid IRMAA surcharges by reducing your Modified Adjusted Gross Income or MAGI.
How Qualified Charitable Distributions Work
- Confirm you are eligible: This is more complicated than it sounds. If you’re not working with a tax professional or CERTIFIED FINANCIAL PLANNER® who is familiar with the process, I highly recommend reviewing this guide:
- Ensure your preferred charity is qualified: It must be a 501(c)(3) to be eligible and you can give to more than one charity.
- Coordinate with your IRA custodians: It is likely they have a separate form and process to handle QCDs versus regular IRA distributions and RMDs. As of this writing, custodians are NOT required to indicate on the 1099-R that the distribution is a QCD.
- Records: Be sure to keep accurate records. You’ll need to have the name and address of the charity, date of the donation, 1099-R, and receipts from the charitable organization.
- Tax preparation: When you receive the 1099-R, you will need to remember that this distribution is not taxable. If you have a tax professional preparing your return, you’ll need to let them know you did a QCD and the amount. Remember, the 1099-R won’t indicate anything about Qualified Charitable Distributions.
how To Enter A QCD on A Tax Form?
This is where many get tripped up on their taxes. And to be fair, it’s totally understandable. First, as has been mentioned, the 1099-R won’t have a box checked for “QCD.” Second, there isn’t even a place on the 1040 tax form that mentions QCDs. You actually have to make a note on the tax form at the section for IRA distributions.
Here are the steps:
- Add up all of your IRA distributions including QCDs.
- Enter that amount on line 4a IRA distributions.
- Then subtract the amount of the QCD.
- Enter that amount on line 4b Taxable amount.
- Next to line 4b Taxable amount, you’ll write “QCD.”
See the image below for where a QCD is entered on the tax return. Please note that these forms are updated each year by the IRS and are subject to change.
Common QCD Mistakes
Waiting until you’re 73:
Many people assume you need to be 73 since that is the current RMD age. You could be forgiven for thinking this. When the QCD rules were set, they aligned with the RMD age at the time. QCD age was 70 ½ as was the RMD age. However, when the RMD ages were changed, the QCD age remained at 70 ½.
Additionally, QCDs are often used to minimize the impact of RMDs. This results in the mistaken belief that they are only beneficial during RMD years. However, since the QCD age stayed at 70 ½ an opportunity was presented.
Many individuals are concerned about their looming Required Minimum Distributions since part of the RMD calculation is the IRA balance. For this reason, Roth conversion strategies have gained popularity. Roth IRA conversion is a strategy to reduce Traditional IRA balances and minimize the impact of future RMDs.
QCDs beginning at age 70 ½ can have a similar effect. Starting a QCD at this age gives three years to pull money from IRAs without paying income tax. This results in a reduced IRA balance and a lower RMD amount.
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Don’t wait until 73. The QCD window opens at 70½.
Illustration is conceptual. RMD age is 73 for most individuals; 75 for those born 1960 or later. QCD eligibility begins at age 70½ regardless of RMD age. Not tax advice.
Attempting Qualified Charitable Distributions too early:
Another area of confusion relates to the age you can take the first QCD. Like the example above, some of this confusion is due to the RMD rules. With a QCD, you’re not eligible until age 70 ½. With the RMD and prior to the rule change, you had to take the distribution the year you turned 70 ½. That meant you could take the RMD in January or December 31st. If you took it before the end of the calendar year, you were good.
Another reason for the confusion is due to IRS rules that allow “catch-up” contributions to IRAs, SIMPLE IRAs, and other retirement plans. The “catch-up” rule allows increased contributions in the year you turn 50. In that scenario, you don’t have to wait until you’re 50, you just need to be 50 at some point in that year.
Incorrect Tax Filing:
As mentioned earlier, many people fail to account for the QCD correctly on their tax form. Since there is no code on the 1099-R for a QCD, it is easily missed. If you do your own tax preparation, you need to remember to account for the distribution properly. The tax form will ask for “IRA Distributions.”
This is where you enter the total amount shown on the 1099-R. It will then ask for the “Taxable Amount” which is where you enter zero. If you’re using a tax professional, you can’t expect them to know you did a QCD. You must tell them since it won’t show on a 1099-R. Don’t let all your thoughtful tax planning be for nothing.
Taking an RMD instead of the QCD:
This can be a little confusing so let’s drill down. If your intent is to minimize the impact of your RMD, you need to ensure the distribution is a QCD. Many people take their RMD early in the year. Or, you may have recurring distributions that you’ll take throughout the year that will satisfy the RMD.
Because of the IRS “first dollars out” rule, any distributions taken prior to the QCD are not QCD eligible. This likely means that those first few recurring distributions you took in the early part of the year will be taxable income. Stated another way, you can’t go back and classify your RMDs as QCDs. Once a distribution is made from the IRA, that ship has sailed.
Not ensuring a direct transfer:
Your IRA custodian must send the charitable contribution directly to the qualified charity. You can’t receive the funds and deliver the proceeds yourself.
Non-qualifying organization:
Not all 501(c)(3) organizations are considered “qualified charities.” For example, private foundations are 501(c)(3) but not eligible for QCDs. More detail on this subject can be found via the IRS website.
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Common QCD mistakes — and how to avoid them
For educational purposes only. Not tax or legal advice. Consult a qualified tax professional before implementing any QCD strategy.
Qualified Charitable Distributions: Case Study
Bridgeview Capital Advisors — Hypothetical Example
The same $10,000 donation — two very different tax outcomes
The QCD saves $960 in taxes — on a donation they were already planning to make. The charity receives the same amount either way.
Hypothetical 2026 example. Figures based on MFJ filers age 65+ using the standard deduction. Individual results will vary. Not tax advice.
In this scenario, we’ll look at a retired couple who are about to take their first Required Minimum Distribution. We’ll call them Ronny and Rhonda Retiree. They are charitably inclined and usually give about $10,000 per year to Shriners Hospitals for Children. They don’t have enough deductions to itemize so they typically file their taxes with the standard deduction.
Here are the key figures for 2026 without a QCD:
- $125,050 Adjusted Gross Income
- $10,000 Taxable RMD
- $10,000 Charitable Contribution (not itemized due to the standard deduction)
- $35,500 Standard Deduction age 65+
- $14,000 New Senior Bonus Deduction
- $75,550 Taxable Income
- $7,940 Total Tax
Now compare with the key figures for 2026 with a QCD:
- $115,050 Adjusted Gross Income
- $10,000 QCD satisfying the RMD and donated to Shriners Hospitals for Children
- $35,500 Standard Deduction age 65+
- $12,000 New Senior Bonus Deduction
- $67,550 Taxable Income
- $6,980 Total Tax
Utilizing the QCD strategy of replacing the RMD saves $960 in taxes!
Common Questions about QCDs
A Qualified Charitable Distribution (QCD) is a tax strategy that allows individuals age 70½ or older to donate directly from their IRA to a qualified charity. The donation is excluded from taxable income and can count toward Required Minimum Distributions (RMDs).
To qualify, you must be at least 70½ years old, the funds must come directly from a pre-tax IRA, and the donation must go to an eligible 501(c)(3) charity. Private foundations and donor-advised funds do not qualify.
In 2026, the maximum QCD limit is $111,000 per taxpayer, per year. Married couples can each make their own QCDs from their individual IRAs.
QCDs can lower taxable income, satisfy RMDs tax-free, reduce Medicare IRMAA surcharges, and potentially increase deductible medical expenses by lowering Adjusted Gross Income (AGI).
The IRS requires that any IRA distribution taken before a QCD is processed counts toward your RMD first, and cannot be reclassified as a QCD after the fact. This means you must set up your QCD before taking any other IRA distributions for the year. If you have recurring monthly distributions, review the timing before they begin.
Yes, and this is one of the most overlooked planning opportunities. QCDs are available starting at age 70½, which is up to three years before RMDs begin at 73. Using QCDs during this window reduces your IRA balance and therefore the size of your future required distributions. It works similarly to a Roth conversion in effect, but with no tax cost for those already giving to charity.
Enter the full IRA distribution amount on line 4a of Form 1040, subtract the QCD amount, enter the taxable remainder on line 4b, and write “QCD” next to it. Your 1099-R will not indicate that a QCD was made. You must track this yourself and tell any tax professional preparing your return before they file.
Common mistakes include waiting until age 73 instead of 70½, not ensuring the IRA custodian transfers funds directly to the charity, donating to non-qualified charities, or failing to report the QCD correctly on tax forms since the 1099-R does not indicate it.
If you itemize your deductions, it can still be beneficial. However, not to the same degree as the standard deduction. When you itemize, then use the QCD, the charitable contribution amount is no longer available as an itemized deduction.
Therefore, your total itemized deductions are reduced. In many cases, the reduction in itemized deductions by using the QCD means itemizing deductions is no longer necessary. Instead, the standard deduction would be used. The QCD is still beneficial though it may not provide as much of a reduction in taxes.
conclusion
Qualified Charitable Distributions can reduce taxes, replace your RMD, increase deductible medical expenses, and lower your Medicare IRMAA surcharges.
You must be at least age 70 ½, have an IRA, give to a qualified charity, and give no more than $111,000 in 2026.
There are several mistakes and pitfalls to avoid. These include incorrect tax filings, mistiming the QCD election, receiving the funds directly from the custodian, and giving to non-qualified charities.
This is just one tax strategy of many. While the potential tax savings are significant with QCDs, imagine what you can achieve with the many others that exist.
Careful tax planning will help ensure you execute these strategies properly. It will also help you identify other opportunities to help grow and protect your wealth.
Important Disclaimer
This Qualified Charitable Distributions article is for educational purposes only. It is not intended to be used as the sole basis for financial decisions. Bridgeview Capital Advisors, Inc. does not provide tax or legal advice and all individuals are encouraged to seek the guidance of qualified tax professionals prior to making any decisions about their personal situation. Taxable events may be irrevocable and may impact other facets of your overall finances.
