Using QCDs to Lower Income Taxes
April 10, 2022

Written by Larry TakahashiLarry Takahashi, CFP

For charitably-minded individuals who are at least 70½ years old, did you know you can make tax-free charitable donations directly from your traditional IRA?

A Qualified Charitable Distribution (QCD) allows you to benefit your favorite charity and exclude up to $100,000 from gross income. If you file a joint return, your spouse can exclude additional QCDs up to $100,000 (if 70½ or older).

To make a QCD, you instruct your IRA custodian to make a distribution directly from your IRA to the eligible charity, which must be a qualified 501(c)3 organization. The distribution check (payable to the charity) can be mailed directly to the charity or to you, if you’d like to give them the check yourself.

These QCDs qualify as your annual otherwise-taxable Required Minimum Distributions (RMDs) from your IRA account. While RMDs are considered taxable income, a QCD is not, which can be especially beneficial to you if you must take RMDs and don’t need the extra money. The QCD amount is excluded from your adjusted gross income on your tax return, thus impacting various tax calculations.

Additionally, because taxable RMDs may also push you into higher tax brackets and result in negative impacts, such as the cost of Medicare benefits, making QCDs may help prevent such occurrences from happening. QCDs may also help reduce your taxable RMDs in future years.

Note: The first IRA distribution of each year is considered your RMD. You cannot retroactively deem the first distribution to be a QCD, so make your QCDs early in the year.

Other regulations may apply. This article is for informational purposes only and does not represent tax advice. Please be sure to consult your tax and other professional advisors to review what is best for your personal situation.

Larry Takahashi, CFP®, AIF®, RICP®, is a wealth advisor in Torrance and Co-chair of Torrance Memorial’s Professional Advisory Council. Reach him at 424-247-7268 or

Securities offered through Grove Point Investments, LLC, member FINRAFINRA/SIPC. Investment Advisory Services offered through Grove Point Advisors, LLC. Grove Point Investments, LLC & Grove Point Advisors LLC are subsidiaries of Grove Point Financial, LLC. Larry Takahashi Financial Services is not affiliated with Grove Point Financial, LLC or its subsidiaries.