If you are charitably inclined and taking mandatory withdrawals from your retirement accounts (also known as Required Minimum Distributions), you may be eligible for a unique financial planning opportunity called a Qualified Charitable Distribution.

The content on this page is meant to serve as an educational guide. To determine if this form of charitable giving could be a good fit for your unique circumstances, we strongly suggest having a conversation with your financial advisor.

If you are not currently a Cassaday & Company, Inc. client, but would like to discuss QCDs or any financial matter further, please click here.


Senior Vice President Michael Carey, Cassaday & Company, Inc.’s in-house expert on QCDs, has put together a comprehensive educational video presentation.

You can watch the video in its entirety, or skip to certain segments by scrolling down to FAQs and clicking on the video associated with the content.


What is QCD?

A Qualified Charitable Distribution (QCD) is a transfer of funds from an IRA (excluding ongoing SEP or SIMPLE IRAs) directly to a qualified charity. In order to qualify for a QCD, the IRA must be owned by an individual who is over the age of 70½.

Qualified charities must be 501(c)(3) organizations eligible to receive tax-deductible contributions.

Some charities do not qualify for QCDs:

  • Private foundations
  • Supporting organizations: i.e., charities carrying out exempt purposes by supporting other exempt organizations, usually other public charities
  • Donor-advised funds, which public charities manage on behalf of organizations, families, or individuals

QCDs could be used strategically to fulfill some or all of your Required Minimum Distribution (RMD). Because a QCD goes directly to charity, it does not count towards your taxable income, thus lowering your Adjustable Gross Income (AGI). Lowering your AGI could have potential tax advantages.

What is RMD?

A Required Minimum Distribution (RMD) is a specific amount of money that the Internal Revenue Service (IRS) mandates you withdraw from certain retirement accounts annually beginning the year you turn age 70½. The list of retirement accounts that require RMDs can be found here.

Your RMD for each year is calculated by dividing your IRA account balance as of December 31 of the prior year by the applicable distribution period or life expectancy. You can determine your distribution period or life expectancy by using this table.

Failure to take a full RMD in a given year will result in IRS penalties of 50% of the amount not distributed.

  • Traditional IRA accounts
  • Inherited/Beneficiary IRAs
  • Inactive SEP IRA and Simple IRAs

Ongoing SEP IRAs and ongoing Simple IRAs are not eligible to use QCDs.


Required Minimum Distributions (RMDs) are included in your Adjusted Gross Income (AGI), while QCDs are not. Thus, QCDs can lower your AGI, and a lower AGI can trigger further tax advantages and reduce overall tax liability.

For example:

1. Potential to Deduct More Medical and Dental Expenses

If you itemize deductions, starting in 2019 you can only deduct medical expenses in excess of 10% of your AGI. Therefore, the lower your AGI, the more medical and dental expenses you can deduct.

For example, if your AGI is $75,000, 10% is $7,500, meaning all expenses over $7,500 are deductible. If your AGI is $50,000, then the threshold is only $5,000.

2. Potential to Reduce Medicare Premium Surcharges

If you are above a certain income threshold, you are required to pay a surcharge on top of your standard Medicare premiums. This extra charge is known as an Income Related Monthly Adjustment Amount (IRMAA) and applies to Medicare Part B (which covers outpatient services and doctors’ fees) and Medicare Part D (which covers prescription drugs).

Your IRMAA surcharge is calculated based on your tax return information from two years prior. For example, the amount used to calculate your IRMAA in 2019 would be based on the Modified Adjusted Gross Income (MAGI) from your 2017 tax returns. In 2019, the IRMAA surcharges apply to persons with a MAGI of more than $85K on a single return or more than $170K on a joint return.

Lowering your AGI by using a QCD could potentially reduce this surcharge.

3. Potential to Limit Exposure to Net Investment Income Tax

In addition to the IRMAA Medicare Surcharge, there is another Medicare tax that could affect upper-income retirees called the Net Investment Income Tax (NIIT). The NIIT is a 3.8% tax applied to your net investment income if your MAGI exceeds a certain threshold. In 2019, those thresholds were $200,000+ for single filers and $250,000 for joint filers.

The NIIT differs from the IRMAA tax because it applies to investment income only. Investment income may include capital gains, dividends, certain annuities, rental income, or royalties, to name a few. It is possible to owe both the IRMAA and NIIT.

Since QCDs can reduce taxable income, they could be an effective way to limit exposure to the NIIT.

4. Potential to Lower Social Security Taxes

The taxability of your Social Security is based on “combined income,” which is defined as:

Combined income = AGI + Non-taxable interest + ½ of Social Security

If your combined income is greater than $25,000 for single filers or greater than $32,000 for married or filing jointly, then your benefits become taxable. In reducing your AGI through using a QCD, you may reduce the taxability of your Social Security income.

5. Potential to Get Full Credit for Your Donation

Under the new tax law, standard deduction amounts in 2019 are nearly double what they were in previous years at $12,200 for single filers and $24,400 for joint filers. Because of this increase, many find it is less advantageous to itemize deductions.

Regardless of whether you itemize or take the standard deduction, you can get “full credit” for your QCD by having that amount taken out of your AGI. Lowering your AGI could potentially reduce your thresholds and allow you to take greater advantage of your deductions.


Retirement account owners past age 70½ taking RMDs are eligible to make QCDs. Those who do not need their entire RMD for living expenses are considered ideal candidates for using QCDs as part of their overall financial plan.

You can still make a QCD even if you need to spend all or a portion of your RMD, but it will depend on your individual situation. We recommend speaking to your financial advisor to see if utilizing QCDs is the best strategy for your unique situation.

It’s important to note that even though your RMD can be taken anytime within the year you turn 70½, a QCD cannot be taken until the IRA owner is age 70½ or older. For example, if you turn 70½ in June 2019, you would still be able to take your RMD in say February 2019 if you wanted to, but you would not be able to take it as a QCD.


The annual QCD limit is $100,000 per account owner.

If you file a joint return, and each spouse owns an IRA account and is at least 70½, each spouse could make a QCD up to $100,000.

Note that the amount of the QCD can exceed the amount of the owner’s RMD, as long as the maximum QCD doesn’t exceed $100,000 per account owner. If you are the account owner, it is important to keep track of your charitable contributions to make sure they clear before December 31 and that the sum of your contributions does not exceed the annual limit.


There are two ways to make a QCD:

1. Designate a specific charity on your custodian’s IRA Distribution Form

This is only recommended if you will only be donating to 1 or 2 charities. The custodian will be responsible for sending the check directly to the chosen charity.

This is the only option available to make a QCD from a Beneficiary IRA.

2. Checkbook issued through a traditional IRA account

With this option, you are able to write checks directly from your IRA account to qualified charities. If this option is of interest to you, it’s important to consider the following:

    • You are responsible for sending checks to charities.
    • You’ll need to be aware of your current year RMD before you start writing QCD checks. If your goal is to gift your RMD amount only, this is essential so you can ensure your QCDs do not exceed your RMD amount.
    • Keep a log of all QCD checks you write from your IRA account.
    • Any QCD check you write must clear your IRA account by December 31 if you would like it to count for that year. Some charities don’t cash their checks right away. It’s important to keep track so you can follow up with the charity if needed.

Reminder: A qualified charitable distribution can only come directly from a qualified retirement account. That means your IRA custodian needs to make a check from your IRA payable to a qualifying charity. If you withdraw funds and then try to make a charitable donation, it will not be considered a qualified charitable distribution. To make this process easier, your advisor would be happy to set up check writing capabilities directly from your retirement account, for you.


The Tax Cuts and Jobs Act (TCJA), in effect as of January 2018, brought with it increases to the standard deduction. As conventional charitable contributions must be itemized on Schedule A, if the sum of your itemized deductions is less than the standard deduction, your charitable gifts will not carry the impact they could on your taxes. This means you will not be able to benefit fully from your charitable giving.

QCDs do not require that you itemize, meaning you may still take advantage of the higher standard deduction and receive greater tax benefits from your giving. As detailed in the section above titled “What are the benefits of using a QCD?,” a QCD excludes the amount donated from your taxable income, unlike regular withdrawals from an IRA. Keeping your taxable income lower will carry further benefits than gifting directly from a checking account.


Cassaday & Company, Inc.’s deadline for completing all QCD transactions is November 1.

Any QCD check you write must clear your IRA account by Dec 31If a check drawn on your IRA account does not clear by 12/31, it is not considered part of your IRA distribution for the yearIRS penalty on an insufficient distribution is 50% of the amount not distributed.

Keep in mind that charities can be slow to cash contribution checks, especially at year-end when they experience a higher volume than usual.