Taxes Tax Credits & Deductions Learn About Qualified Charitable Distributions A Tax-Efficient Way To Donate Money to Charity By William Perez Updated on December 18, 2022 Reviewed by Ebony J. Howard Reviewed by Ebony J. Howard Ebony Howard is a certified public accountant and a QuickBooks ProAdvisor tax expert. She has been in the accounting, audit, and tax profession for more than 13 years, working with individuals and a variety of companies in the health care, banking, and accounting industries. learn about our financial review board In This Article View All In This Article Required Minimum Distributions How a QCD Can Help Qualifying Rules for QCDs Effect on Your Adjusted Gross Income The Rules Are Different for Roth IRAs You Can't Claim a Deduction, Too Frequently Asked Questions (FAQs) Photo: Moyo Studio / Getty Images A qualified charitable distribution (QCD) is a withdrawal from an individual retirement arrangement (IRA) that's made directly to an eligible charity. IRA account holders who were at least age 70 1/2 can contribute some or all of their IRAs to charity. It might seem counterintuitive that anyone would want to give their savings away after making contributions for years in anticipation of the day when they would retire, but there can be tax advantages for doing so. Key Takeaways Qualified charitable distributions allow you to distribute IRA funds directly to eligible charities.By donating these funds, you bypass the 50% excise tax penalty for not taking required minimum distributions.You also avoid paying income tax on those funds, as they're a donation and not income.Rules are slightly different for QCDs from a Roth IRA, as those funds were made post-tax and Roth IRAs don't require RMDs while you're alive. Required Minimum Distributions You must begin taking required minimum distributions (RMD) from a traditional IRA when you reach age 72, or 70 1/2 if you reached 70 1/2 before Dec. 31, 2019, even if you don't want or need the money at this time. These distributions are taxable at ordinary income rates. In most cases, you'll have to pay a 50% excise tax on whatever distributions you were supposed to take but didn't. Note The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 increased the age threshold for starting RMDs to 72 for those who had not reached age 70 1/2 by Dec. 31, 2019. How a Qualified Charitable Distribution Can Help QCDs count toward your required minimum distribution for the year. If you have to take RMDs but you don't really want or need the money, QCDs can be a good way to distribute the minimum required amount out of the IRA and thereby avoid the 50% excise tax penalty. As an added benefit, you'll avoid paying income tax on the distributions. Qualifying Rules for QCDs You must be at least 70 1/2 at the time you make a qualified charitable distribution, depending on when you reached age 70 1/2. You can make a QCD at that age even if you don't have to begin taking RMDs until age 72. The funds must be transferred directly from the IRA custodian to the eligible charity—and "eligible" is an important word here. The charity must be one that is approved by the IRS. You can't simply turn the money over to a friend or neighbor. Eligible charities include 501(c)(3) organizations and houses of worship. Donor-advised funds and so-called supporting organizations are not permitted to receive QCDs on a tax-advantaged basis. Note The IRS offers a searchable database of approved charities on its website. The maximum amount that can be donated through a qualified charitable distribution is $100,000 per IRA owner. This means that each spouse can donate $100,000 if you're married, but you can't "share" the limit. In other words, one spouse can't give $125,000 and the other $75,000. You're each separately subject to the $100,000 limit. Effect on Your Adjusted Gross Income QCDs can be used to help keep your adjusted gross income (AGI) and taxable income within a desired range, as income from a charitable distribution "bypasses" your Form 1040. That is, you'll still report the full amount of the QCD on Form 1040 on the line for IRA distributions, but you'll enter zero (and "QCD" next to it) as the taxable amount if the full amount was a QCD. This can help prevent your income from reaching the thresholds for the net investment income tax and from disqualifying you from claiming other tax breaks. These thresholds depend on your filing status, which is determined by factors such as whether you're married, widowed, or support one or more child dependents: Married filing jointly or qualifying widow(er): $250,000All other cases: $200,000Married filing separately: $125,000 The Rules Are Different for Roth IRAs Roth IRAs have different QCD rules than traditional IRAs. It's possible to take a QCD out of a Roth IRA, but there's generally no advantage in doing so because Roth IRA distributions are already tax-free. You can't deduct contributions made to Roth accounts, as you've already paid taxes on those dollars you contributed. Roth IRAs aren't subject to RMDs, either (during the owner's life), so the more tax-efficient move might be to use a traditional IRA (if you have one) to fund the QCD. Note QCDs can't come out of SEP IRA or SIMPLE IRA plans, either, if they are ongoing plans. You Can't Claim a Deduction, Too The key benefit of a QCD is that the distribution amount is not included on your Form 1040 as income, but there's a bit of a downside here, too. The QCD cannot also be used as a deductible charitable contribution if you itemize your deductions. That would be something of a double tax break for the same transaction. A QCD has no effect on your ability to claim the standard deduction, however. Note You would need more in overall itemized deductions than the standard deduction for your filing status to make itemizing worthwhile. QCDs can benefit older taxpayers who take the standard deduction rather than itemize because there's no tax benefit in making a donation to charity when you claim the standard deduction. In other words, you're not losing anything by making the QCD. For non-itemizers, donating to charity via a direct transfer out of an IRA is the only way to get a tangible tax benefit from that donation. Frequently Asked Questions (FAQs) Do I have to file any extra forms with my tax return if I make a qualified charitable distribution? Typically, you report qualified charitable distributions on your Form 1040. There are two instances in which you'd also need to file Form 8606 in addition to your Form 1040. One is if your qualified charitable distribution was made from a Roth IRA, and the other is if it was made from a traditional IRA in which you had basis and also received a distribution that same year. How can I be sure that an organization I'm considering is qualified? The charity you make the charitable distribution to must be a 501(c)(3) organization, eligible to receive tax-deductible contributions. You can use the IRS website to see whether an organization qualifies. There may be organizations you won't find with the IRS search tool that are still eligible donees, such as some churches. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. IRS. "IRA FAQs—Distributions (Withdrawals)." IRS. "Publication 590-B (2021), Distributions from Individual Retirement Arrangements (IRAs)." Congress.gov. "H.R. 1994," Pages 54-55. IRS. "Retirement Plan and IRA Required Minimum Distributions FAQs." Wolters Kluwer. "SECURE Act: IRA Contributions and Charitable Distributions by 70+ Somethings. Fidelity. "Qualified Charitable Distributions (QCDs)." IRS. "Topic No. 559 Net Investment Income Tax." IRS. "Roth IRAs." IRS. "Retirement Topics — Required Minimum Distributions (RMDs)." Fidelity. "Donating to a Charity Using a Qualified Charitable Distribution (QCD)." IRS. "Other Eligible Donees."