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What Are Qualified Charitable Distributions?

We’re all about giving generously around here. It’s why we teach that giving isn’t just something to do around the holidays or that one time of year when Girl Scout cookies are for sale. (Though who doesn’t love a cause that includes cookies!)

We want to see you win with money so that you can live and give like no one else. And with qualified charitable distributions (also called QCDs), you can give through your traditional IRA and save money on your income taxes. That sounds better than cookies!

What Is a Qualified Charitable Distribution?

A qualified charitable distribution is a withdrawal from an individual retirement account (IRA) to an eligible charity. These distributions allow you to donate to charitable organizations directly from your IRA.

Tax Advantages of Qualified Charitable Distributions (QCDs)

By making donations through a qualified charitable distribution, you get a pretty major tax advantage: lowering your adjusted gross income (AGI). To calculate AGI, you add up all the money you made in a year from everything: wages, capital gains, rental income, etc. (this is your gross income). Then you start subtracting (or “adjusting” in IRS terms) certain things from your gross income to get your AGI.

Lowering your AGI can make a big difference come retirement age and tax time. See, when you make a regular (non-QCD) donation to charity, it becomes an itemized deduction (if you choose not to take the standard deduction). An itemized deduction only lowers taxable income. But a QCD lowers AGI, which is used to determine a bunch of different tax calculations, like your tax bracket, Social Security tax and more. The lower the AGI, the lower the taxes—make sense?

An important thing to know is that if you take advantage of a qualified charitable distribution, you can’t also list it as an itemized deduction. That would be like getting a double tax break, and the IRS tends to frown on things like that.

Another tax benefit that comes with qualified charitable distributions is the ability to move money from a traditional IRA to a Roth IRA with less tax implications, if you’ve chosen to do that. It works like this: Roth IRAs are taxed when the money goes into the account (the opposite of a traditional IRA). So if you decided to convert your traditional IRA balance to a Roth IRA, you would want to have less money to move since Roth IRA funds are taxed going in. By first making a QCD, you reduce the total amount of taxable funds in your traditional IRA before you move them to your Roth IRA.

What Is a Required Minimum Distribution?

Required minimum distributions (also called RMDs) are the funds you withdraw each year from a tax-deferred retirement plan, like a traditional IRA (tax deferred meaning funds are taxed on the way out, not on the way in). Basically you can’t keep funds in your IRA forever—you have to start making a minimum amount of withdrawals when you reach your 70s.

These funds count as personal income which makes them taxable at ordinary federal income tax rates. So, by taking your required minimum distribution, you could potentially raise your AGI enough to land in a tax bracket where you’ll owe additional federal income tax. But if you don’t take the RMD, you’ll get hit with a 50% excise tax on the funds you were supposed to take but didn’t. Rock, meet Hard Place.

This is where qualified charitable distributions can come in handy, if that’s how you choose to give. Let’s take a look at how they work and if they’re right for your financial situation.

How Qualified Charitable Distributions Work

Qualified charitable distributions are currently only available to folks 70 1/2 or older with an IRA. You can make a QCD with a Roth IRA, but funds from Roth IRAs aren’t taxed on the way out, so there’s no tax benefit.

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The SECURE Act of 2019 changed the way required minimum distributions work for traditional IRAs. If you’re between 70 1/2 and 73, you could have up to a 30-month gap where you can make QCDs, lowering your taxable income, without having to take the RMD yet.1  

In other words, you get the tax advantage of the qualified charitable distribution without any new added income from an RMD. So, what happens 30 months later when you turn 73? Now your required minimum distributions kick in. But by making a QCD, you can offset some of the natural tax hit that could come with taking your RMD.

Most importantly, after you turn 73, QCDs count toward your RMD. If you don’t want to withdraw the full amount for any reason, you can donate up to $100,000 from your traditional IRA to eligible charities.2

What Is Considered an Eligible Charity?

Not all charitable causes are created equal. Unfortunately, your favorite nephew’s wish to attend the top school in the country for underwater basket weaving doesn’t count as a charitable cause. At least not in the eyes of the IRS. But as long as your contribution goes toward an eligible 501(c)(3) organization, you’re good.

Listen up to this next part. Your qualified charitable distribution must come from your IRA. Literally. The funds have to be sent from your IRA directly to the 501(c)(3) of your choice. You can’t have the funds distributed to you in your name and then redistribute the funds to the charity. The whole process will be null and void if you do that, and you’ll lose the tax advantage. (The only exception is having a check made out to the charity, have it mailed to you, and then you can mail or deliver the check to the organization. But the funds have to go directly to the charity.)

The $100,000 max charitable distribution limit applies to each individual. So if you’re married, you can each make qualified charitable distributions up to $100,000. What you can’t do is combine and then split your contributions. For example, Mark and Robin can’t take their collective $200,000 and divvy it up so that Mark donates $125,000 somewhere and Robin donates the remaining $75,000 somewhere else.

What isn’t considered an eligible charity? Any of the following:

  • Private foundations
  • Supporting organizations (These are tax-exempt charities that support other tax-exempt organizations, like other public charities.)
  • Donor-advised funds (These are funds managed by a public charity on behalf of an organization, family or individual.)3

Pros and Cons of Qualified Charitable Distributions

Qualified charitable distributions can be a feel-good way to also access tax advantages. Remember though, you’re not giving just to get tax benefits. But knowing how your giving impacts your taxes is part of a well-managed retirement plan. Let’s take one final look at the pros and cons of qualified charitable distributions.


  • Can lower your adjusted gross income
  • Can help you avoid the 50% excise tax that comes from not taking your required minimum distribution, if you don’t want to withdraw it
  • Can make it easier to move money from a traditional IRA to a Roth IRA


  • Max contribution limit of $100,000
  • Charities must be listed on the IRS’s list of approved charities
  • Can’t withdraw directly and donate to charity—the money must come from the IRA
  • Can’t also claim an itemized charitable deduction on your taxes
  • Subject to age requirements

Work With a Tax Pro You Can Trust

There’s no reason your charitable giving has to slow down because of retirement. Qualified charitable distributions just give you a new way to think about it. And you definitely don’t have to figure them out on your own.

If you need help creating a retirement plan, reach out to a SmartVestor Pro. Our SmartVestor program can put you in touch with a qualified investment professional near you. They’ll not only help with a plan, but will also make sure you understand how everything fits together.

For detailed questions about taxes, get with one of our RamseyTrusted tax professionals who can make sure your giving lines up with your retirement plan! They live and breathe making sure your taxes are done right, so you can have peace of mind.

Find a tax pro in your area today!

This article provides general guidelines about investing topics. Your situation may be unique. To discuss a plan for your situation, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros. 

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About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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