How a Qualified Charitable Distribution (QCD) Can Slash Your Tax Bill in Retirement
Charitable Giving Strategy: Qualified Charitable Distribution
If you're over age 70½, you can make a Qualified Charitable Distribution from your IRA — the money goes straight to charity, you pay zero tax, and the charity keeps every dollar. It's one of the most tax-efficient ways to give during your lifetime.
Background
When you withdraw from a pre-tax retirement account, you normally pay income tax on every dollar that comes out.
Once you reach age 70½, however, you can send money from your IRA directly to a qualified charity. This is called a Qualified Charitable Distribution (QCD). Because the money goes directly to the charity — never passing through your hands — you owe no income tax, and the charity keeps the full amount.
Once you reach your required beginning age for RMDs (currently age 73 for most retirees, and age 75 for those born in 1960 or later), you must take annual Required Minimum Distributions (RMDs) from pre-tax retirement accounts. If you don’t need that income, consider directing it to charity through a Qualified Charitable Distribution (QCD) instead.
Example
You just turned 73, and your RMD from your IRA is $40,000 this year. You worked at a university hospital and receive a state pension. Between that pension and Social Security, your living expenses are fully covered — so you'd rather give the RMD to charity than pay taxes on money you don't need.
Let's compare two ways to do that.
Option 1: Withdraw, Then Give to Charity
Assume your retirement tax rate is 22% federal and 5% state — a combined 27%.
You withdraw $40,000 payable to yourself. The IRS takes $10,800, and you net $29,200. You write the charity a check for $29,200. Not bad, but it could be better.
(You could itemize the $29,200 as a charitable deduction, but depending on your situation, you may not get as much tax benefit as you'd expect — especially if you're not bunching donations.)
Option 2: Qualified Charitable Distribution
You instruct your IRA custodian to send the $40,000 directly to the charity. That's a QCD.
You pay no tax. The IRS gets nothing. The charity gets $40,000. That's the full amount — $10,800 more than in Option 1.
Do It Right on Your Tax Return
When you take a distribution from your IRA, the custodian sends you a Form 1099-R the following January.
Form 1099-R reports how much you withdrew. It does not automatically tell the IRS the money went to charity — so the IRS may still treat it as taxable income unless you correctly report it.
Important: Starting with distributions made in 2025, IRA custodians are beginning to use a new Code Y on Form 1099-R to identify QCDs. However, this reporting is being phased in — not all custodians will use it consistently, and it may not capture every QCD you make. You still need to keep your own records and inform your tax preparer.
Make sure your tax preparer knows you made a QCD. In our example, your return should show a $40,000 IRA distribution with a $0 taxable amount.
More Fine Print
A QCD is simple in concept but precise in execution. Get the details right so you — and your charity — reap the full benefit.
QCDs can only be made from an IRA, not a 401(k). (You can roll funds from a 401(k) into an IRA first, then make a QCD.)
You can make a QCD starting at age 70½, even though RMDs don't start until 73. When Congress raised the RMD age, they left the QCD age at 70½.
You must actually be 70½ on the date of the distribution. Turning 70½ later in the year doesn't count.
The check must be made payable to the charity, not to you. Your custodian can mail it directly to the charity or send it to you to forward — mailing it straight to the charity is simpler and cleaner.
The annual QCD limit is $111,000 per person (in 2026) [CHECK: this limit is now indexed for inflation and was $108,000 in 2025 and $111,000 in 2026 — verify the current-year figure before publishing]. A married couple can each make a QCD up to the annual limit from their own IRAs, for a combined maximum of $222,000. Each spouse must be at least 70½.
QCDs can only go to a public charity. Private foundations don't qualify. Neither do donor-advised funds (DAFs) — even though a DAF is technically a 501(c)(3). Donor-advised funds have their own advantages worth considering separately.
For a deeper technical dive, Michael Kitces has an excellent post on QCDs worth bookmarking.
Ready to put this into practice? If you're an ER physician or high-income professional looking for straightforward, evidence-based financial guidance, we'd love to connect. Schedule a free intro call with Yahara Wealth Management — no pressure, no sales pitch, just a conversation.
This article is for educational purposes only and does not constitute personalized tax, legal, or financial advice. Tax rules are subject to change. Please consult a qualified tax professional or financial advisor to determine how QCD rules apply to your specific situation.