For clients with significant income and retirement savings, charitable giving can do more than advance the causes you care about — it can also be a valuable tax strategy. One powerful tool for this purpose is a Qualified Charitable Distribution (QCD) from an IRA.

What is a QCD?

A Qualified Charitable Distribution is a direct transfer of funds from your traditional IRA to a qualified 501(c)(3) charity. If you are age 70½ or older, you can give up to $108,000 per year ($216,000 per couple) in 2025 directly from your IRA without those funds being included in your taxable income.

This is distinct from taking a withdrawal and then making a gift — which would generate taxable income and then yield only a partial deduction subject to charitable limits. A QCD, by contrast, bypasses your income entirely, delivering the full value to charity and maximizing the tax benefit.

How It Works

1. You instruct your IRA custodian (such as Fidelity, Schwab, Vanguard) to make the distribution directly to the charity.
2. The funds must go straight to the charitable organization — not to a donor-advised fund, private foundation, or you personally. (This is important – you can’t even hand the charity a check from your Fidelity IRA account – the IRA custodian must send the funds directly).
3. The amount transferred counts toward your Required Minimum Distribution (RMD) if you are age 73 or older.¹
4. Because the QCD is excluded from your income, it can help reduce the taxation of Social Security benefits, avoid Medicare premium surcharges, and preserve itemized deduction phaseouts.

Key Tax Advantages

A major advantage of QCDs is that they are not subject to the Adjusted-Gross-Income (AGI) limits that normally restrict charitable deductions. Typically, cash contributions to public charities are deductible only up to 60% of AGI, and gifts of appreciated assets are limited to 30%. With a QCD, these limits simply do not apply — the full amount (up to the annual limit) can be excluded from income, regardless of AGI. This allows high-income donors, who might otherwise be capped by charitable deduction limitations, to make larger and more impactful gifts directly from their IRAs.

Additionally, QCDs can provide an alternative to donating appreciated securities, without triggering capital gains tax. While gifts of appreciated stock are generally tax-efficient, a QCD avoids the issue altogether by transferring pre-tax IRA dollars directly to charity. You effectively give “pre-tax” money that would have been fully taxable if withdrawn, converting it instead into a tax-free charitable contribution. This approach lets you preserve your taxable investment assets while satisfying philanthropic goals with the most tax-advantaged funds available.

Why You Should Act Now

Timing matters. Custodians and charities alike often face year-end backlogs. To ensure your QCD is processed and received by December 31, initiate the transfer as early as possible — ideally by late November. A QCD only counts in the year the charity receives the funds, not when you initiate the request.

Beyond timing, executing QCDs early can give you:

• Predictable tax outcomes before year-end planning deadlines.
• Reduced Adjusted Gross Income (AGI), improving other tax attributes such as medical and SALT deduction thresholds.
• Smoother RMD compliance, avoiding last-minute distributions that could push you into a higher tax bracket.
• A QCD may provide a larger tax benefit than donating cash or assets to a charity and claiming a charitable deduction.²

When QCDs Might Not Be Right For You

QCDs are not for everyone. Depending on your age, how your wealth is structured, and whether you itemize your taxes, it could make more sense to transfer appreciated stock directly to a charitable organization, or donate assets to a donor-advised fund and make distributions in future years through the DAF. But if you are age 70 1/2 or older or have Required Minimum Distributions, then you should at least consider whether a QCD would reduce your federal taxes.

In Summary

For high-income taxpayers with substantial IRAs, QCDs deliver the rare combination of simplicity, generosity, and tax efficiency. If charitable giving is already part of your financial plan and you are age 70 1/2 or older, consider funding those gifts directly from your IRA. It’s a tax-smart way to support the organizations you value most.

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1. The RMD age for those born in 1960 or later is 75, rather than 73. ↩︎
2. For example, the OBBBA, passed on July 4, 2025, limits the deductibility of charitable donations for itemizers to the amount that exceeds 0.5% of their AGI, beginning in 2026. Consequently, itemizers will not get a full deduction for their charitable gifts beginning in the 2026 tax year. Schwab.com provides a great use-case where a QCD would allow a taxpayer who has $160k in income to save over $4k in federal taxes, compared to a direct charitable donation of the same amount. https://www.schwab.com/learn/story/reducing-rmds-with-qcds ↩︎

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Disclaimer: This article is for general informational purposes only and does not constitute legal, tax, or financial advice. Individual circumstances vary, and readers should consult their attorney or financial advisor before taking any action based on this information.