• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
main-logo

Zynergy

Retirement Planning

  • 732-784-2380
  • Member Login
  • Home
  • About Us
  • Our Services
  • Retirement Education
  • Retirement Enrichment Program
  • Zynergy Cares
  • Contact Us
Using Qualified Charitable Distributions to Help Reduce Income Tax in Retirement | Zynergy Retirement Planning

Using Qualified Charitable Distributions to Help Reduce Income Tax in Retirement

What is a Qualified Charitable Distribution (QCD)?

As people reach retirement age, they often start thinking about their legacy, and begin to ponder ways in which they can help support the charitable causes that are important to them. However, given the complexity of the US Tax Code, it can be challenging for many retirees to decide on the most effective and tax-efficient way to make charitable donations. One option that has become popular over the past few years is the Qualified Charitable Distribution (QCD).

Understanding Required Minimum Distribution (RMD) and its Connection to QCDs

A QCD is a tax-efficient way for those who are age 70 ½ or older to donate money directly from their Traditional IRA to a qualified charity. Not only does this option allow you to support your favorite charity (or charities), but it also provides for the opportunity to reduce your taxable income! It’s important to note that while the IRS allows taxpayers to deduct their charitable contributions as an itemized deduction, since 2018 many people have found themselves using the higher standard deduction on their tax returns, and therefore do not get the tax benefits associated with their charitable contributions.

Procedure for Making a QCD

Under current tax law, people aged 73 or older must withdraw a certain amount of money from their Traditional IRA each year, even if they don’t need the funds. This annual distribution is commonly referred to as the Required Minimum Distribution (RMD). Not only are these distributions required, but in almost all situations they are subject to ordinary income tax. When you perform a QCD, the distribution (as long as it is $100,000 or below), is not taxed as income! In order to make a QCD, you must instruct your Traditional IRA custodian to transfer funds directly from your IRA to a qualified charitable organization of your choosing. It’s important to emphasize the fact that the donation must go directly to the charity; it cannot be given to an individual, private foundation, or donor-advised fund.

Benefits of a QCD

While there are several benefits in making a QCD, it may not be the right strategy for everyone, so it’s important to speak with a financial advisor and/or tax professional to determine if it’s a good fit for your financial situation. The benefits of a QCD include:

  • Lowering your taxable income – By making a QCD, you can lower your taxable income for the year. This can be especially beneficial for those who find themselves on the edge of the next tax bracket. In addition, if you make a QCD, you can apply it against your RMD for the year, which can help reduce your income tax burden.
  • Fulfilling your charitable goals: A QCD allows you to support the causes that are important to you while also reducing your tax burden. This can be a win-win situation for both you and the charity!

Potential Downsides of a QCD

Some of the downsides of a QCD include:

  • Limited to Traditional IRA funds – A QCD can only be made from a Traditional IRA. Therefore, if you have other types of retirement plans (i.e., 401k), you will not be able to take advantage of this strategy.
  • No charitable deduction – Since a QCD is not considered taxable income, the IRS will not allow an individual to also claim a charitable deduction for the contribution on your taxes. This means you won’t get a tax break for the donation beyond the reduction of income tax.
  • Limited to age 70 ½ and older – In order to make a QCD, you must be at least 70 ½ years old. Therefore, if you’re younger than age 70 ½, you will need to explore other options for making a donation to a charity.

Contact Zynergy Retirement Planning

A QCD can be a smart way for retirees to support charitable causes while also reducing their income tax burden. By making a donation from their Traditional IRA to a qualified charity, they can lower their taxable income, apply the donation against their annual RMD, and support a charitable cause that is important to them. To discuss QCD’s further contact Zynergy Retirement Planning.

About Bill Gallagher

Bill Gallagher, CFP®, MPAS® is a Senior Planner with Zynergy Retirement Planning, LLC, a financial planning specializing in working with mature adults over 50 years old.

Bill holds the Certified Financial Planner designation and the Master Planner Advanced Studies designation, through the College for Financial Planning. Bill is also a member of the Financial Planning Association (FPA).

Primary Sidebar

Bill Gallagher

CFP®, MPAS® and Senior Planner

Key Takeaways

  • Qualified Charitable Distributions (QCDs) offer a tax-efficient way for retirees (age 70 ½ or older) to support their favorite charities directly from their Traditional IRA.
  • QCDs can be used to satisfy the Required Minimum Distribution (RMD) obligations, which are mandatory withdrawals from a Traditional IRA for individuals aged 73 or older.
  • There are some limitations to consider with QCDs. They can only be made from a Traditional IRA, not other types of retirement accounts. Also, the IRS does not allow an additional charitable deduction for QCDs. Lastly, this strategy is only available to those who are at least 70 ½ years old.

Start your email subscription

  • This field is for validation purposes and should be left unchanged.

Contact Zynergy Retirement Planning

Schedule a free consultation with a retirement specialist today.

732-784-2380

Footer

Zynergy Retirement Planning

Zynergy Retirement Planning manages more than $152 million in assets for our members with the goal of transparency and unparalleled service.

  • 732-784-2380
  • 10 NJ-35, Red Bank, NJ 07701

Members

  • Member Login
  • About Us
  • Our Services
  • Retirement Enrichment Program
  • Zynergy Cares
  • Contact Us

Retirement Education

  • Dummies Articles
  • 7 Deadly Retirement Sins
  • Zynergy Blog
  • Retirement Q & A
  • Community Scholarship

Get Monthly Retirement Tips

Receive regular news & information vital to your retirement right in your inbox from Zynergy Retirement Planning.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2025 · Zynergy Retirement Planning

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.