Financial Planning Insights

Qualified Charitable Distributions: How to Use Your IRA to Make Tax-Efficient Charitable Gifts

Bob Campbell, CFP®, Clarissa Hobson, CFP®, Sara Kohr, CFP®

If you are an IRA owner and you plan on making significant charitable contributions this year, you may want to consider utilizing a tax-efficient strategy called a Qualified Charitable Distribution, or “QCD.” A QCD allows IRA owners aged 70 1⁄2 or older to distribute money directly from their IRA to a qualified charity without paying income tax on the distribution. Individuals can make up to $100,000 each year in tax-free QCDs from all of their IRAs; for those who are married, each spouse may make QCDs of up to $100,000 each.

If you are 73 or older, in 2024, a significant benefit of a QCD is that it can be applied toward satisfying your Required Minimum Distribution (“RMD”) for that year. If you take your RMD as income, the distribution will be taxed as ordinary income. However, if you make a QCD from your IRA, the amount of the QCD is considered a nontaxable transfer, thereby reducing your adjusted gross income. Reducing your adjusted gross income for the year may provide additional tax benefits, such as reducing your Medicare premiums or lowering the amount of taxes owed on your Social Security benefits. Keep in mind, however, that the charitable distribution must be made prior to completing your RMD in order for it to be considered a nontaxable Qualified Charitable

In recent years, most taxpayers have taken the standard deduction rather than itemizing deductions. This is due to recent legislation that eliminated or drastically reduced many itemized deductions, as well as increases in the standard deduction amounts in 2024, these amounts are $32,300 for joint filers both age 65 or older and $16,550 for single filers age 65 or older. Unless your total allowed itemized deductions exceeds the standard deduction amounts, you will take the larger standard deduction amount.

So, for anyone that is 70 1⁄2 or older and charitably inclined, a QCD is a useful way to preserve an income-tax-reducing charitable deduction.

If you are a Transform Wealth Client and would like to make a Qualified Charitable Distribution, please contact your Transform Wealth Financial Advisor.

You should consult your tax advisor to see if the Qualified Charitable Distribution strategy would benefit you, and to ensure any QCDs are reported accurately, as Transform Wealth does not provide tax, legal, or accounting advice. In considering this material, you should discuss your individual circumstances with professionals in those areas before making any decisions.


This document is for informational purposes only. It is educational in nature and should not be considered a recommendation of Transform Wealth’s investment management and financial planning services, strategy or any particular product in any jurisdiction. Your investment goals and objectives are unique so you are encouraged to consult with an investment professional before making any investment decisions.