by: Begley Law Group

by Thomas D. Begley, Jr., Esquire, CLEA

            There are two ways to make charitable contributions.  One would be to simply write a check to the charity and claim a charitable deduction on your income tax return.  The other would be to make a Qualified Charitable Distribution (QCD).  This article will discuss the pros and cons of each approach.


What is a QCD?

            Under the Internal Revenue Code (IRC), a QCD means any distribution from an Individual Retirement Account (IRA) paid directly by the retirement account custodian or trustee to the charitable organization, which was made on or after the date the individual for whom the retirement account is maintained has attained age 70-1/2.


What Are the Requirements of a QCD?

            To be eligible to be treated as a QCD, the following requirements must be met:

  • The individual must be at least 70-1/2 years of age.
  • Tax Year. The distribution must come out of the IRA prior to the Required Minimum Distribution (RMD) deadline, which is usually December 31 of each calendar year.
  • Direct Payment. The funds must be transferred directly from the IRA custodian to the qualified charity.  The custodian writes the check directly to the charity.  If the check is payable to the individual who then writes a check to the charity, the contribution does not qualify as a QCD.
  • Maximum Amount. The maximum annual distribution that can qualify as a QCD is $100,000.  This is an aggregate sum for all charities.  For joint filers, each spouse can make a $100,000 QCD from one spouse’s IRA.
  • Eligible Account Types
  • Traditional IRAs
  • Inherited IRAs
  • Simple IRA

Roth IRAs are not subject to RMDs during lifetime and distributions are generally tax-free, so a distribution from a Roth IRA may not be appropriate.

  • Eligible Charity. A QCD is effective only if the contribution is made to a qualified charity established under IRC §501©(3).

Rules for QCDs are found in 28 U.S.C. §408(d)(8) and Revenue Procedure (Rev. Proc.) 2020-45 and 2021-45.


Advantages of a QCD Rather Than a Non-QCD Contribution

  • Non-taxable. Distributions from the IRA to the charity are not counted as taxable income for federal income tax purposes.
  • Adjustable Gross Income. Since the QCD is not considered taxable income, the taxpayer has a lower adjustable gross income (AGI).
  • Itemized Deductions. Most taxpayers take advantage of the increased standard deductions, which are as follows:
Filing Status Standard Deduction for 2023
Married Filing Jointly $27,700
Married Filing Separately $13,850
Single $13,850
Head of Household $20,800

NOTE:      Taxpayers over age 65 or blind can claim an additional deduction of $1,500, or if both blind and disabled can claim an additional deduction of $3,000.  If the taxpayer is over age 65 filing single or as head of household, the additional deduction of $1,850.

            If the taxpayer takes advantage of the standard deduction, he or she is unable to take a charitable deduction for charitable contributions.

  • Tax Bracket. By making a QCD, the taxpayer’s taxable income will be lower, and it may prevent the taxpayer from going into a higher tax bracket.
  • Tax Benefits and Exemptions. Because a QCD limits taxable income, the taxpayer may remain eligible for certain tax credits or exemptions, such as the amount of Social Security benefits subject to taxes, Medicare premiums, certain state real estate tax exemptions that are income based, etc.

NOTE:      Receipt of the charitable contribution by the IRC §503(c) organization if tax-free to the organization.

  • Filing Requirements. The QCD is recorded by the IRA custodian as a normal distribution on IRS Form 1099-R.  The taxpayer should keep an acknowledgment of the donation to the charity for tax records.  The charity must also validate that the taxpayer did not receive any goods or services in exchange for the contribution.
  • Medicare Premiums. Medicare premiums are based on adjusted gross income.  In certain cases, a QCD may keep the taxpayer in a lower bracket for calculation of Medicare premiums.
  • Potential Exception. In some instances, a QCD from an IRA may not be the best alternative.  If the taxpayer intends to contribute highly appreciated securities, the benefit of avoiding the capital gains tax may outweigh the benefits obtained by making a QCD.