Qualified Charitable Distribution (QCD)

Make An Impact Today

 
 

A Qualified Charitable Distribution (QCD), also known as an IRA Charitable Rollover, is a tax-efficient way for individuals to make a gift to a qualified charity directly from a Traditional IRA. This popular option provides a significant tax benefit by allowing you to make a gift that is excluded from your taxable income. This means you do not have to itemize deductions to receive a tax benefit.

Instead of taking the required minimum distribution (RMD) from your IRA when you reach the distribution age, you can instead name a qualified charity as the recipient, which results in a QCD. You can also make a tax-free, qualified contribution over and above the minimum distribution amount, up to the annual limit. The QCD must be paid directly from your IRA to the charity to qualify.

WHY CONSIDER AN IRA CHARITABLE ROLLOVER?

  • Your gift will be put to use today, allowing you to see the impact your donation is making.

  • You pay no income taxes on the gift. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions.

  • Since the gift doesn’t count as income, it can reduce your annual income level, also known as your Adjusted Gross Income (AGI). This may help lower your Medicare premiums and decrease the amount of Social Security that is subject to tax.

 

FAQs

I’m reaching my eligibility age in a few months. Can I make this gift now?

No. You must be age 70½ or older on the date you make the gift. You should talk to your financial advisor about the optimal time to make a QCD.

Can the Qualified Charitable Deduction offset a Required Minimum Distribution (RMD)?

Yes. The RMD age has been raised to 73 for individuals who reach age 72 after December 31, 2022. However, the eligibility age for a QCD remains 70½. A QCD counts toward your RMD, but only if you are already subject to the RMD rules. This means you can still make a QCD at age 70½, 71, or 72, which provides a tax-free gift, even before your RMD is required.

Do I receive an income tax deduction with a Qualified Charitable Distribution?

You do not receive a tax deduction for a QCD from a regular IRA; the transfer is not, however, recognized as taxable income. Because a QCD reduces income and is not an itemized deduction, the gift benefits even those donors who do not itemize.

Is my 401(k) eligible for making a Qualified Charitable Distribution?

No. A QCD cannot be made directly from an employer-sponsored retirement plan, such as a 401(k), 403(b), or 457(b). However, it may be possible to transfer or roll over funds from these accounts into a Traditional IRA. Check with your retirement plan administrator for eligibility and guidelines. Once the new IRA is established, you may then initiate an IRA QCD.

Are there limits on the gift amount?

The annual limit on QCDs is no longer a fixed $100,000. For the 2025 tax year, the annual limit is $108,000 per individual. This amount is now indexed for inflation. A married couple with separate IRAs may each transfer as much as $108,000 annually, for a potential combined annual gift of up to $216,000.

How do I initiate an IRA Qualified Charitable Distribution (QCD)?

Contact your IRA administrator to request a Qualified Charitable Distribution. If you are able to write checks directly from your IRA account, please follow the instructions below under the question “How Do I Use My Check-Writing Facility To Transfer Funds From My IRA To Your Organization?”.

Are there any restrictions on a Qualified Charitable Distribution?

A QCD is only eligible for outright donations to certain types of organizations (such as GRACE). A QCD cannot be given:

  • to a Donor Advised Fund, a supporting organization, or a private foundation.

  • in exchange for benefits such as tickets to an event, membership, etc..

A New Opportunity: The One-Time Gift to Life-Income Plans

Since 2023, a groundbreaking provision allows for a one-time QCD to fund a life-income gift. This was previously prohibited.

  • Eligibility: This is a one-time, lifetime election to fund a Charitable Gift Annuity (CGA) or a Charitable Remainder Trust (CRUT or CRAT).

  • Limit: The maximum amount for this one-time transfer is subject to inflation adjustments. For the 2025 tax year, the limit is $54,000 per individual. This amount counts toward your annual $108,000 QCD limit.

  • Requirements: Any gift annuity funded through this provision must begin fixed payments within one year of funding, and the payout rate must be at least 5%. The annuity or trust must also be non-assignable.

How do I use my check-writing facility to transfer funds from my IRA to GRACE?

Some IRA custodians offer check-writing privileges to allow you to make your gift to GRACE directly. If you wish to make a gift with a check from your IRA account, please make it out to “GRACE” and mail it along with this form to:

Godly Response To Abuse in the Christian Environment
4026 Wards Road
Unit G1, # 198
Lynchburg, VA 24502

Note: For tax purposes, the date of the gift is the date the funds leave your IRA account (not the postmark on the envelope). It is important to allow sufficient time for the rollover check to clear to ensure that the funds are withdrawn during your preferred tax year.

What type of acknowledgment should I expect to receive from my IRA gift to GRACE?

GRACE will send an acknowledgment and statement that no goods or services were received in exchange for the gift. You should keep this acknowledgment for your tax records.

How do I report my Qualified Charitable Distribution?

For distributions made in 2025 and later, your IRA custodian will report your QCD on IRS Form 1099-R using a new Code "Y" in Box 7 to specifically identify the distribution as a QCD.

To report a QCD on your personal tax return (Form 1040), you will generally report the full amount of the charitable distribution on the line for IRA distributions. On the line for the taxable amount, you will enter zero if the full amount was a qualified charitable distribution. It is crucial to enter "QCD" next to this line to indicate the nature of the distribution.

  • Note on Post-70½ IRA Contributions: A new rule dictates that any deductible contributions made to your IRA after you reach age 70½ may reduce the tax-free amount of your QCD. You must first "draw down" any such contributions before the QCD can be fully tax-free.

Please contact your tax advisor to confirm your personal tax reporting requirements.

 

Please contact GRACE at zane@netgrace.org for any additional instructions.

The information provided here is for informational purposes only and is not offered as tax or legal advice. Donors and potential donors should consult with a qualified tax advisor regarding their own specific circumstances, the tax and nontax considerations, and the consequences associated with the gift described in this document.