Charitable giving in retirement — QCDs and beyond.
If you're 70½ or older with charitable intent and a sizable IRA, the qualified charitable distribution is one of the most tax-efficient tools in the code. Most retirees who'd benefit have never heard of it.
Charitable giving in retirement has a different tax math than charitable giving during the working years. Once you reach 70½, you gain access to the qualified charitable distribution — a direct IRA-to-charity transfer that satisfies all or part of your RMD, never appears on your tax return as income, and reduces your taxable retirement income at the source. Used well, it's strictly better than writing a check from your taxable account.
The qualified charitable distribution (QCD)
At 70½ or older, you can transfer up to $108,000 per year (2025 limit, indexed) directly from a traditional IRA to a qualifying public charity. The transfer never enters your taxable income — meaning it doesn't increase your AGI, doesn't trigger IRMAA, doesn't reduce other deductions, and doesn't push you into a higher bracket. It also counts toward your RMD. You don't itemize the deduction (since the amount never hits your income) — but the at-the-source exclusion is often worth more than the itemized deduction would be.
Why this beats writing a check
A retiree who takes their full RMD ($60,000), pays tax on it, and then donates $20,000 to charity from their checking account: the $60,000 increases AGI, possibly raises Medicare premiums via IRMAA, reduces medical-expense deductions, increases the taxable portion of Social Security, and may be only partially recoverable via itemization (if at all, given the higher standard deduction). A retiree who QCDs $20,000 of the RMD directly to charity: the $20,000 never hits AGI, none of those second-order effects apply, and the remaining $40,000 of RMD is the only taxable amount. The savings can be thousands of dollars per year.
The rules to follow
You must be at least 70½ at the time of the transfer (not just turning 70½ that calendar year — the actual half-birthday). The transfer must go directly from the IRA custodian to the charity; checks made out to you don't qualify. The charity must be a qualifying 501(c)(3) public charity — donor-advised funds, supporting organizations, and most private foundations don't qualify. Keep documentation: the receipt from the charity must state no goods or services were received.
SECURE Act 2.0 expanded the rules
Starting 2024, a one-time QCD of up to $54,000 (2025 limit, indexed) can fund a charitable gift annuity, charitable remainder unitrust, or charitable remainder annuity trust. This is new and worth investigating with a CPA if you want lifetime income from your gift while still getting the QCD treatment.
Donor-advised funds for pre-70½ givers
If you're not yet 70½, the donor-advised fund (DAF) is the workhorse vehicle. Contribute appreciated securities (or cash) in a high-income year, take the full charitable deduction that year, then distribute to charities over multiple subsequent years. The 'bunching' strategy lets you alternate years of large itemized deductions with years of standard deduction — capturing both. Particularly powerful for households with appreciated employer stock or other concentrated positions.
Texas community-property considerations
For married Texas couples, IRAs are separate property of the named owner. QCDs come from the named owner's IRA only. If charitable intent is jointly held, plan QCDs from both spouses' IRAs to maximize the annual exclusion (each spouse has their own $108,000 limit).
For clients with charitable intent, this is one of the rare areas where the law is straightforward, generous, and underused. If you're giving anyway, the QCD almost always wins.