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Fix My Portfolio: You can QCD your RMD, PDQ. If you’re over 70 and giving money to charity this year, you’ll want to know what this means. 

Dear James,  You asked just in time! You have until Dec. 31 to make a qualified charitable distribution (QCD) from your IRA or other tax-deferred retirement plan and have it count toward your required minimum distribution (RMD) for 2022. This is a tax-efficient way to give to charity, reduce your current tax liability and also


Dear James, 

You asked just in time! You have until Dec. 31 to make a qualified charitable distribution (QCD) from your IRA or other tax-deferred retirement plan and have it count toward your required minimum distribution (RMD) for 2022. This is a tax-efficient way to give to charity, reduce your current tax liability and also reduce your future taxes by reducing the size of your IRA overall. 

Retirement planning is full of acronyms, and QCD is among the more obscure, even though many people give to charity. It is a way to take money from a tax-deferred retirement account and give it to charity without having to pay income tax on the distribution. If you’re over the age of 70½ and planning to give away money — even a small amount — it’s worth learning how to do it with a QCD. It isn’t hard and doesn’t require a great deal of paperwork. The IRS doesn’t even track QCDs as a separate line item because it just gets reported on the same lines as a regular distribution from your retirement accounts. 

The first thing to know is that you have to act fast to make sure all the financial transactions involved go through in time — this is not the kind of thing that can wait until the afternoon of Dec. 31 if you want it to count on this year’s taxes. You need to get your IRA or 401(k) custodian to cut a check to your designated registered charity directly (not to a donor-advised fund or to a private entity) and that may take a few days. It’s also best to make sure that the charity receives the gift — mail service can be fickle. 

If you’re planning for 2023, you’ll want to take a pause and consider the new rules of the omnibus spending bill, which includes provisions of the Secure 2.0 bill. There’s just one major item specific to charitable giving, which says that the current QCD limit of $100,000 will start being indexed for inflation, and it also allows a one-time $50,000 distribution to charities through various estate-planning mechanisms. 

But other major changes will affect your planning. Most important, while the age you can start taking QCDs is staying at 70½, the age for starting required minimum distributions from tax-deferred retirement accounts, which are calculated by an IRS formula, is going to rise to 73 in 2023, and then to 75 in 2033. If you have a large account and you’re looking to give away some or all of it, that gives you more time to lower the balance of the account before you have to start taking money out and paying tax on it. 

What are your intentions? 

The key to deciding what strategy is best for you is to take stock of where you are in your retirement spending — how much do you need to cover your needs, what do you want to leave to heirs and how much do you want to give away to charity? Then you decide which accounts to divvy up for those purposes. 

For instance, if you have a Roth IRA — and thanks to Secure 2.0, also a Roth 401(k) — that’s the most beneficial account to leave to your heirs, because they won’t have to pay taxes on the amount in the account nor be required to take required minimum distributions. They’ll simply have to move the money to a taxable account at the end of 10 years and then start to pay tax on the growth from that point forward. 

You’ll want to use your taxable savings and investments primarily for your living expenses, although you may want to weigh donating appreciated stock directly to charity, or bunching donations to create a larger tax deduction in some years.

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That leaves you to do most of your charitable giving from your traditional IRA or 401(k) accounts, which will help you in several ways. First, once you are of age, it’ll satisfy your RMD, or at least part of your RMD, without it counting as taxable income. The amount you give also lowers the balance of your account. This is mostly a benefit to those who are not using their RMD to cover primary living expenses and would prefer not to keep taking them every year and having them added to their taxable income. 

Tax filing complications

If you count your charitable giving as your RMD, you can’t then also claim that same amount as an itemized deduction. That would be double-dipping. 

But if you’re looking to donate more than $100,000, you “can partner the two strategies,” says Michelle Jann, senior wealth manager at Goelzer, an investment management firm based in Indianapolis. “This is the upper end of the client spectrum, for people who have a large tax liability from selling a business or a large, concentrated position of stock that they were selling.” 

The same process applies if the amount you’re looking to give away is $5,000, or even just $100 here and there. The more institutions, however, the more paperwork. “The onus is on taxpayers to track those transactions,” Jann says. She has some clients who take half their RMD for their own expenses and pay tax on it as income, and then give away half to 10 different charities. 

When making the decision for how much and when to give, it can be important to consult with your tax preparer. You’ll need where your income is in the tax brackets, which were expanded for 2023 due to inflation. If you are just pushed into a higher tax bracket, making a QCD could help drop you to a lower tier and ease your overall tax burden. 

If you lower your adjusted gross income, that impacts a number of things, like how your Social Security is taxed, whether you can take medical expenses as a deduction and whether your Medicare premiums are subject to surcharges. Says Jann: “It can drastically affect some of those other deductions.”  

Got a question about the mechanics of investing, how it fits into your overall financial plan and what strategies can help you make the most out of your money? You can write me at

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