If you’re charitably-inclined, have an IRA account, and are over the age of 70 ½–or soon will be, you’ll want to know about Qualified Charitable Distributions (QCDs). Here are five important questions and answers about QCDs:
What is a Qualified Charitable Distribution or QCD?
A Qualified Charitable Distribution allows you to direct money from your IRA to a qualified charity (or charities) that qualify under the tax code. The annual limits are indexed for inflation, and for 2025 the maximum amount you can donate from an IRA account is $108,000. A one-time QCD of $54,000 can go to a split interest entity, such as a charitable remainder annuity trust, charitable remainder unitrust or a charitable gift annuity.
Who qualifies for a QCD?
To be eligible for a QCD, an IRA owner must be at least 70 ½ years of age. QCDs are only allowed out of certain IRA types: traditional, rollover, inherited, inactive SEP-IRA plans, and inactive SIMPLE plans.
What are the benefits?
Typically, when you take money out of a traditional IRA account it becomes taxable income but distributing money out of your IRA as a QCD allows you to avoid the income taxes on these monies. If you are of Required Minimum Distribution (RMD) age, doing a QCD will also count toward your RMD for the year. It’s very important to know that the charity must cash the check before year-end for it to count towards your RMD. We recommend requesting a receipt or confirmation of the donation or taking the QCD directly to the charity.
How does it work?
Since QCDs have gained in popularity, Charles Schwab now makes it easy for a client to process them. There is a simple form that needs to be signed by the client, either physically or electronically, that your P&A Service Advisor can help you with. Once the form is submitted to Schwab, they will issue a check made payable to the charity. This check will either be mailed to the client for delivery to the charity, or directly to the charity if the client provides an address on the form. There is also an option to make recurring distributions on an annual, quarterly, or monthly basis to a charity or charities.
How are QCDs reported?
Previously, custodians reported QCDs on Form 1099-R as a “Normal Distribution” with no special code to distinguish the QCD. New in 2025, the IRS has introduced a new “Code Y” for IRA custodians to indicate a QCD. We recommend you consult with your accountant on how to apply the QCD to your Form 1040.
If you are interested in doing a QCD or would like to discuss further, please contact your Lead or Service Advisor for more information!
Clicking on the links above may result in you leaving the Pittenger & Anderson, Inc. website. The opinions and ideas expressed on these external websites are those of third-party vendors and Pittenger & Anderson, Inc. has not approved or endorsed any of this third-party content. For the full Terms & Conditions of using the Pittenger & Anderson, Inc. website, click on this link.
Pittenger & Anderson, Inc. does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Additionally, the information presented here is not intended to be a recommendation to buy or sell any specific security. To learn more about our firm and investment approach, check out our Form ADV.
To view this article and others like it online, visit the P&A blog at https://pittand.com/blog/.
Click here to download the PDF version of this article.
