If you are 70½ or older and you have an IRA, there is a move that can send money to charity and keep it out of your taxable income at the same time.
It is called a qualified charitable distribution, or QCD, and it has quietly become one of the most useful tools for retirees who do not need every dollar their retirement account throws off.
You ask your IRA custodian to send money directly from your traditional IRA to a qualified charity.
Because the money never touches your hands, it is not counted as income.
That matters more than it sounds, because it keeps the distribution out of your adjusted gross income, which is the number the tax code uses for a long list of other decisions.
The limit for 2025 is $108,000 per person, up from $105,000 last year.
If you are married and both of you have IRAs, each of you can use your own limit, which means a couple could move up to $216,000 to charity this way.
The transfer has to go straight from the account to the charity.
If you withdraw the money first and write a check, the tax break disappears.
Why does adjusted gross income matter so much?
A lower AGI can reduce the taxable portion of your Social Security benefits.
It can keep you under the threshold for the Medicare income-related monthly adjustment amount, the surcharge that raises Part B and Part D premiums for higher earners.
It can also help you avoid the 3.8% net investment income tax and keep more of your itemized deductions from phasing out.
For people who take the standard deduction, this is often the whole ballgame.
Since the standard deduction jumped years ago, many retirees no longer itemize, which means their charitable gifts no longer produce a write-off.
You get the tax benefit without itemizing, because the benefit comes from excluding the income rather than deducting a gift.
There is one more feature that gets overlooked.
Once you reach your required beginning date, a QCD can count toward your required minimum distribution for the year.
So if you have to pull money out of the IRA anyway, you can route part or all of it to a charity and avoid the tax hit on that amount.
The RMD still gets satisfied, but the income does not land on your return.
The charity must be a qualified 501(c)(3) organization, and it cannot be a private foundation or a donor-advised fund, with a narrow exception for certain sponsoring organizations in disaster relief situations.
You cannot use a QCD to fund a gift annuity or a charitable remainder trust.
And you need a written acknowledgment from the charity, the same one you would get for any deductible gift.
The transfer must be completed by December 31 of the tax year you want it to count for.
Custodians can be slow in December, so financial planners often suggest starting the paperwork in November.
Keep your own records, because the IRA custodian reports the distribution on Form 1099-R, and you or your tax preparer will need to note that it was a QCD.
If you are charitably inclined and sitting on a traditional IRA, this is worth a conversation with a tax professional before year-end.
My take: the QCD is one of the few tax breaks that rewards planning rather than complexity, and it fits naturally with the giving many retirees already do.
The catch is that it only helps if you set it up correctly and early.
Final Thoughts
Waiting until the last week of December is how people lose the benefit they were counting on.