How to Make an RMD Donation to Charity

Retirees can use a portion of their retirement savings to support charities through a Qualified Charitable Distribution (QCD). This method involves a direct transfer from an Individual Retirement Arrangement (IRA) to a charity. For those required to take annual withdrawals from their retirement accounts, a QCD can satisfy that obligation while providing tax benefits.

Understanding the Qualified Charitable Distribution

A Qualified Charitable Distribution can be used to satisfy an individual’s annual Required Minimum Distribution (RMD). The primary advantage is that the donated amount is excluded from the taxpayer’s Adjusted Gross Income (AGI). This is different from a standard charitable deduction.

By lowering AGI, a QCD can provide broader financial benefits. For example, a lower AGI may help a taxpayer avoid income-based surcharges on Medicare premiums or reduce the taxable portion of their Social Security benefits.

The exclusion from AGI is beneficial for taxpayers who do not itemize their deductions. Because the standard deduction is high, many people do not itemize, and a QCD allows them to receive a tax benefit for their charitable giving. The AGI reduction can also be more valuable than a standard deduction for those who do itemize, as it can help them qualify for other tax credits with AGI limitations.

Key Eligibility Rules for a QCD

To execute a QCD, the IRA owner must be at least 70½ years old on the date of the transfer. This age requirement is distinct from the age at which RMDs must begin, which is currently 73. This means an individual can begin making QCDs before they are subject to RMDs.

The funds for a QCD must come from an eligible retirement account, as distributions from employer-sponsored plans like 401(k)s or 403(b)s are not permitted. Eligible accounts include:

• Traditional IRAs
• Inherited IRAs, if the beneficiary is over age 70½
• Inactive Simplified Employee Pension (SEP) IRAs
• Inactive Savings Incentive Match Plan for Employees (SIMPLE) IRAs

Active SEP and SIMPLE IRAs, which are still receiving employer contributions, are not eligible for QCDs.

The recipient must be a qualified 501(c)(3) organization. It is important to verify the charity’s status before the transfer. Distributions to donor-advised funds, private foundations, and supporting organizations are not permitted and will disqualify the transaction from QCD treatment.

For 2025, the annual limit is $108,000 per individual, an amount that is indexed for inflation. A married couple could each make a QCD of up to $108,000 from their respective IRAs. This limit applies to the total of all QCDs made in a calendar year, regardless of the number of charities.

Executing the Direct Charitable Transfer

The IRA owner must instruct their custodian to transfer funds directly to the charity, as the money cannot pass through the owner’s possession. If an owner withdraws the funds first, the transaction becomes a taxable distribution, and any subsequent donation falls under standard deduction rules.

There are two main methods for the direct transfer. The first is for the IRA custodian to send a check or wire transfer to the charity. The IRA owner must provide the custodian with the charity’s name, address, and tax identification number for the transfer.

Alternatively, some custodians offer check-writing privileges, allowing the IRA owner to write a check from the IRA payable directly to the charity. The owner can then deliver this check. The distribution date for tax purposes is when the funds leave the IRA, so it is important to allow enough time for the check to clear before year-end.

Reporting the QCD on Your Tax Return

The IRA custodian will issue a Form 1099-R after a QCD is made, which will use a specific code to identify the distribution starting in the 2025 tax year. On a federal income tax return, the taxpayer reports the total distribution on the line for IRA distributions. On the line for the taxable amount, they enter $0 if the entire distribution was a QCD, or otherwise the amount that was not part of the QCD.

The taxpayer must also obtain a written acknowledgment from the charity. This document should state the date and amount of the donation and confirm that no goods or services were received in exchange. This receipt should be kept with tax records but does not need to be filed with the return.