Here is a Strategy for Avoiding Paying Taxes on Your RMD

April 13th, 2025 at 1:52 PM

If you have one or more traditional IRAs and are age 73 or older, you’re probably familiar with three of the most dreaded letters in the tax world: 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, which is precisely why many retirees dread them. But if you’re charitably inclined, there’s a powerful way to meet your RMD requirement without increasing your taxable income: the qualified charitable distribution, or QCD.

With a QCD, you direct money from your IRA straight to a qualified charity. That amount counts toward your RMD for the year—but it 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.

A QCD can help you

• satisfy all or part of your RMD for the year;
• support the charities you care about;
• avoid reporting the RMD as taxable income; and
• 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 go to a Section 501(c)(3) charity—such as a church, school, or other non-profit 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, make sure you get a written acknowledgment from the charity for your records.

Make the QCD first if you plan to take multiple withdrawals from your IRA during the year. The IRS treats your first withdrawal as your RMD, so taking the QCD first ensures it counts toward your RMD.

And most important, don’t forget to let your tax preparer (us) know you made a QCD. We need to report it correctly on your tax return.

Mark S. Fineberg, CPA