How to beat RMD!

If you have one or more traditional IRAs and are age 73 or older, you’re probably familiar with RMD, short for required minimum distribution. 

Starting the year you turn 73, the IRS requires you to withdraw a certain amount from your traditional IRAs annually. This amount is based on your age and increases as you get older.

RMDs are taxable income. But if you’re charitably inclined, there’s a great way to meet your RMD requirement without increasing your taxable income. This is by making a qualified charitable distribution, or QCD.

With a QCD, you direct money from your IRA directly to a qualified charity. That amount counts toward your RMD for the year but doesn’t count as taxable income to you. Even better, you can use a QCD whether or not you itemize deductions, so you can still benefit from charitable giving on your tax return.

Advantages of a QCD:

• They allow you to satisfy all or part of your RMD for the year.

• You will be supporting the charities you care about.

• You can avoid reporting the RMD as taxable income.

• You reduce the risk of being pushed into a higher tax bracket.

While RMDs don’t start until age 73, you can make QCDs when you turn 70 1/2.

The annual QCD limit is generous: up to $108,000 per person per year. For married couples filing jointly, each spouse can make a QCD of up to $108,000 from their own IRA, for a combined total of $216,000 for 2025.

The QCD must be given to a Section 501(c)(3) charity, such as a church, school, or other nonprofit organization. You cannot make QCDs to donor-advised funds or private foundations.

Your best choice is to have your IRA trustee transfer the QCD directly from your IRA to the charity. Also, ensure you get a written acknowledgment from the charity for your records.

Most importantly, remember to let your accountant know you made a QCD so we can report it correctly on your tax return.