QCDs Explained: Turning Your RMD Into a Gift That Matters

A practical guide for retirees want to give with purpose

For many retirees we work with in Minnesota and across the United States, Required Minimum Distributions (RMDs) can feel more like an obligation than something that fits into their retirement plan.

Once you reach the age when RMDs begin the IRS requires you to withdraw a set amount each year from most tax-deferred retirement accounts, including employer-sponsored plans, traditional IRAs, SEP IRAs, and SIMPLE IRAs. Whether you actually need the income or not, those withdrawals are counted as taxable income.

Required Minimum Distributions (RMDs) are required at age 73 for most people, according to the IRS. However, the age depends on your birth year: those born in 1960 or later must wait until age 75, while those born in 1951 through 1959 started at age 73. The first RMD is due by April 1 of the year following the year you reach the required age.

But there’s another way to handle this process. A Qualified Charitable Distribution (QCD) can turn that required withdrawal into something far more meaningful, giving you a way to support causes you care about while keeping the distribution from showing up as taxable income.

At iWealth, we frequently engage in these types of conversations, particularly with families seeking to blend smart retirement income planning with meaningful generosity that impacts others.

If you’ve caught us on iWealthTV, you may have heard Brad Connors, our founder, break down how QCDs work and why they can be a powerful tool for anyone 70½ or older. Below, we’ve taken the most common questions people ask and answered them in a way that fits your real-life decision-making.

What exactly is a QCD?

A Qualified Charitable Distribution (QCD) is a provision in the tax code that allows individuals aged 70½ or older to transfer money directly from an IRA to a qualified charity.

Here are the current limits for QCDs:

• For 2025, the QCD limit is $108,000 per individual.
• For 2026, the limit increases to $111,000 per individual.

If you and your spouse both qualify and each has an eligible IRA, you could each use the per-person limit. The best part is that the amount you send never shows up as taxable income. If you’re already 73 or older, the gift also counts toward your Required Minimum Distribution for the year.

For many Minnesota retirees, QCDs become a way to direct retirement income toward causes they care about, rather than adding another distribution to their tax bill.

Watch: “Mastering the Art of Giving and Inheritance Planning”

Why do QCDs matter if I already take the standard deduction?

This is one of the most important and most misunderstood parts of QCD planning.

Today, most couples take the standard deduction when filing taxes. That means they don’t get any additional tax benefit from itemizing charitable donations. So even if you’re generous throughout the year, there’s no direct tax advantage for giving.

A QCD changes that dynamic. When you give directly from your IRA:

• The charity receives the funds.
• You receive your standard deduction.
• Your RMD obligation for that amount is satisfied.
• The distribution does not increase your taxable income.

This structure makes QCDs, particularly for Minnesota couples using the standard deduction, a highly effective charitable giving option.

Can a QCD reduce my taxable income?

A QCD isn’t technically a “deduction.” Instead, the distribution is never reported as taxable income in the first place. This can influence:

• Future Medicare premium calculations
• Taxation of Social Security benefits
• How much of your income crosses into higher tax brackets

Here’s where thoughtful tax and estate planning really matters. The earlier you talk with a Minnesota financial planner about how RMDs and QCDs fit into both your current and long-term financial picture, the easier it is to avoid year-end surprises, especially the kind that show up as a bigger tax bill than expected.

Watch our founder, Brad Connors, discuss the financial side of charitable giving.

When should I discuss making a QCD with my financial advisor?

At iWealth, we encourage clients to bring this up by the first week of December at the latest. Charities must receive the funds by the end of the calendar year for the QCD to count toward your current RMD.

It’s essential to note that banks and custodians have year-end processing deadlines, so attempting to rush a last-minute transaction can be very consequential.

Every year, our team of Minnesota financial advisors sees retirees who want to direct their RMDs to charity but reach out too late. The earlier you begin the process, the easier it will be to coordinate all the paperwork and get the timing right.

Can I use a QCD to fund any charity of my choice?

You can send a QCD to most 501(c)(3) organizations, but not to:

• Donor-advised funds
• Private foundations
• Supporting organizations
• Personal benefit projects

Many Minnesota families use QCDs to support churches, community food programs, hospitals, universities, or local nonprofits. At iWealth, we can assist in confirming whether your intended charity qualifies and help prepare any required documentation.

Can I give from my IRA even if I don’t need the income?

Yes. In fact, many iWealth clients choose QCDs specifically because they don’t want or need the extra income from their IRA. For them, directing the RMD to a cause they care about feels far more meaningful than watching the distribution get taxed and absorbed into cash flow they aren’t using.

This often arises in our planning meetings, particularly when reviewing your retirement cash flow projections, income buckets, and tax strategies.

Can QCDs support long-term legacy planning?

Absolutely. While QCDs are primarily used for annual giving, they can be part of a much broader charitable legacy plan.

Families who want a longer-term structure sometimes ask about creating a family foundation. At iWealth, we help clients set up these foundations when appropriate, and many combine annual QCDs with other giving strategies. Having a generational wealth strategy in place enables future generations to remain involved in charitable decision-making while preserving the tax-efficient structure of a foundation.

Can I use a QCD from different types of accounts?

A QCD can only be made from:

• Traditional IRAs
• Inherited IRAs
• Roth IRAs (though practically irrelevant, since Roth RMDs don’t apply for original owners)

You cannot make a QCD from:

• 401(k)s
• 403(b)s
• 457 plans

If you want to use retirement assets from those accounts for QCDs, you may need to roll funds into an IRA first. This is something our Minnesota financial advisors handle regularly, so that we can walk you through the various considerations during a planning session.

Does a QCD still make sense if I already support specific charities on an annual basis?

For many Minnesota retirees, the answer is yes. If you already write checks throughout the year, shifting those gifts to QCDs can provide more tax-efficient support without changing your actual level of generosity.

Put simply: You keep giving to the same causes, just in a way that aligns better with your long-term retirement tax strategy.

Read our article: “Finding Joy Through Purposeful Giving.”

Can a QCD help keep my taxes more predictable over time?

It can. While QCDs won’t eliminate taxes, they help stabilize part of your income picture. Because a QCD reduces your taxable distribution amount, it can help keep your modified adjusted gross income (MAGI) from rising unexpectedly from year to year.

This matters for retirees trying to manage:

• Medicare IRMAA brackets
• Taxation of Social Security
• Bracket creep during strong market years
• Large RMDs from growing accounts

Our financial advisors in Minnesota can review these scenarios with you during annual check-ups and year-end planning meetings.

When should you think about adding QCDs to your financial plan?

People bring up QCDs for all kinds of reasons, and you might recognize yourself in a few of these:

• You’ve reached age 70½ and want your giving to be more intentional.
• You’re noticing your RMDs getting larger and want to keep the tax impact in check.
• You’d like charitable giving to play a bigger role in your retirement years.
• You’d rather support organizations you care about than add more taxable income.
• You’re starting to think about longer-term legacy planning, including the idea of a family foundation.

If any of that sounds interesting, a QCD might be worth exploring as part of your overall charitable giving plan.

How iWealth Can Support You Through QCD and RMD Planning

At iWealth, our process is tailored and personalized to meet your needs. When clients come in for their fall or early-winter meeting, QCDs are one of the first items we review. Our team of Minnesota-based financial planners will look at:

• Your projected RMD
• Your current tax bracket
• Your charitable goals
• Whether a QCD fits this year’s strategy
• Timing and paperwork requirements
• Long-term planning ideas, including a foundation setup when appropriate

Charitable giving should feel meaningful and positive, and not rushed. And when done early enough, QCDs become a straightforward, rewarding part of your retirement plan. Thoughtful giving and planning often go hand in hand. QCDs provide an alternative approach to combining the two.

If you’re interested in adding your charitable values to your broader retirement strategy, or you’d like to discuss whether a family foundation makes more sense for your legacy, we are here to help. The iWealth team is ready to help you make informed decisions based on your current circumstances and future goals.

Connect with us to discuss your retirement planning needs.