Using Qualified Charitable Distributions (QCDs) to Satisfy Your RMDs

By Thomas Beirne III, CFP®
Vice President, Senior Wealth Planning Officer and Business Development Manager 
Washington Trust Wealth Management

If you have reached the magic time where you must start taking distributions from your IRA, a Qualified Charitable Distribution (QCD) allows you to meet Required Minimum Distributions (RMDs) while reducing taxable income, making it a highly efficient charitable giving strategy.

What Is a QCD?

A Qualified Charitable Distribution (QCD) is a direct transfer of funds from your IRA to a qualified 501(c)(3) charitable organization. A QCD is excluded from your taxable income.

How a QCD Satisfies Your RMD

Once you reach age 73, the IRS requires you to take Required Minimum Distributions (RMDs) from your traditional IRA each year. These withdrawals are fully taxable as ordinary income, which can potentially push you into a higher tax bracket and increase your Medicare IRMAA brackets (IRMAA, or Income Related Monthly Adjustment Amount, is an incremental premium deducted from Social Security benefits for higher earners).ⁱ A QCD counts toward your RMD without being included in your taxable income.

The Benefits of QCDs

• Reduces your taxable income: Since QCDs don’t count as income, they can help keep you in a lower tax bracket and reduce the impact on Social Security taxation and Medicare surcharges, and may help you qualify for certain tax credits due to a lower Adjusted Gross Income (AGI).
• Satisfies your RMD without additional tax burden: If you don’t need any or all of your RMD funds for living expenses, this is a tax-efficient way to satisfy RMDs while supporting causes you care about.
• Simplifies charitable giving: QCDs provide a tax benefit regardless of whether you itemize deductions.

The Rules of Using QCDs to Satisfy RMDs

• Age requirement: You must be at least 70½ years old at the time of the distribution.
• Annual limit: In 2025, you may donate up to $108,000 ($216,000 for a married couple if both spouses have IRAs).
• Direct transfer: The funds must be transferred directly from your IRA to the charity. If you withdraw the money first and then donate it, it will count as taxable income. Remember the “first dollars out” rule: every distribution from the IRA is counted toward the RMD. This is why it’s important to plan ahead and make QCDs earlier in the year to satisfy RMDs.
• Qualified charities only: Donations must go to a 501(c)(3) organization. Private foundations and donor-advised funds (DAFs) do not qualify.
• Roth IRAs: While QCDs can technically be made from Roth IRAs, there is typically no tax advantage in doing so since Roth distributions are already tax-free.

Example: Using a QCD to Reduce Your Tax Liability

• Situation
  • You’re 75 years old and required to take $40,000 in RMDs from your Traditional IRA this year but don’t need the RMDs for living expenses.
  • Your current taxable income (excluding the RMD) is $350,000, putting you in the 35% federal tax bracket.
• With a QCD
  • Instead of withdrawing the RMD, you directly donate $40,000 from your IRA to a qualified charity as a QCD.
  • This satisfies your RMD requirement, and the QCD is not counted as taxable income.
  • Result: You avoid additional taxes and your Adjusted Gross Income (AGI) remains lower.
• Without a QCD
  • If you withdraw the $40,000 RMD, it’s fully taxable, so you owe an additional $14,000 in taxes (35% of $40,000).
  • Your AGI increases, potentially affecting deductions, IRMAA, and taxation of Social Security benefits.

Is a QCD Right for You? Washington Trust Wealth Management Can Help

If you are charitably inclined and looking for ways to minimize taxes in retirement, QCDs may help you manage your tax burden while aligning with your philanthropic goals. It’s important to speak to a trusted wealth advisor about how to implement a tax-efficient QCD strategy. At Washington Trust Wealth Management, we work with your CPA as part of your financial team to assess the short- and long-term impact of diverse tax strategies to help you protect and grow your wealth.