Client Login 401(K) Login Contact Us Search

As the holidays approach, many of us are thinking about making donations to our favorite charities. It feels good to give, whether it’s our spare change to the bell ringers outside the grocery store or a more substantial contribution through a donor-advised fund.

But those aren’t the only options. If you’re aged 70 ½ or older, you can consider what’s known as a “charitable IRA rollover,” or qualified charitable distribution (QCD). Donating this way not only helps a worthy cause; it can also help save on your taxes. This is especially important because RMDs are subject to ordinary income taxes and, depending on your situation, could push you into a higher tax bracket, which could – in turn – affect your Social Security payments and Medicare benefits.

How QCDs Work

According to the IRS, if you have a traditional, SIMPLE or SEP IRA, you generally have to take required minimum distributions (RMDs) each year, beginning with the year you turn 72 (if your 70th birthday was July 1, 2019 or later). However, if you don’t need these funds from your IRA to pay for your living expenses and you’d rather donate the money to an eligible charity, such as a 501(c)(3) organization, you can make a QCD. A QCD can satisfy all or part of the amount of your RMD for the year, depending on how much you choose to donate. For example, if your RMD was $15,000 and you donate half, you would still need to take the other half to satisfy the IRS’s RMD requirement.

While RMDs are taxable, a QCD is a direct distribution from your IRA to an eligible charity, so when you use your RMD in this way, you lower your taxable income. You can use any contributions and earnings that have accumulated in your IRA with the exception of nondeductible contributions, which are considered a tax-free return of basis. To count toward the current year’s RMD, the QCD must be made prior to your RMD deadline, which is generally Dec. 31.

QCDs are limited to what would otherwise be taxed as ordinary income, and the maximum annual amount that can qualify for a QCD is $100,000. In the situation of a married couple filing jointly, spouses can each make a QCD from their IRAs of up to $100,000 as long as they make the QCD within the same tax year.

Finally, when you make a QCD, you won’t need to itemize your deductions on your tax return since you will have already excluded the QCD from your taxable income. However, you also won’t be able to claim the QCD as a charitable tax deduction.

Restrictions Apply

As with many tax issues, the rules for making QCDs can be complicated, and different rules may apply to you, depending on your personal situation. It’s also important to note that if you donate an amount above your RMD in a particular year, the overage cannot be applied toward your RMD for the following year.

In addition, when making your QCD, you also need to be sure that the funds transfer directly from your IRA to your qualified charity. If you take the distribution personally and then make the donation, your donation will not qualify as a QCD.

Your Advisor Can Help

QCDs can be a great way to make a substantial gift to a charity while getting the tax efficiencies you may need. Your financial or tax advisor can help you develop the best RMD and charitable gifting strategies for your situation and can help you better understand how the rules regarding QCDs apply.


Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. The scope of the services to be provided depends upon the needs of the client and the terms of the engagement.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years with more than $11.4 billion in assets under management and assets under advisement (as of 9/30/2021). As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

©2021 Savant Capital, LLC dba Savant Wealth Management. All rights reserved.

Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments and/or investment strategies recommended and/or undertaken by Savant, or any non-investment related services, will be profitable, equal any historical performance levels, be suitable for your portfolio or individual situation, or prove successful. Please see our Important Disclosures.