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If you are someone who makes charitable contributions and is also required to take Required Minimum Distributions (RMD) from your tax-sheltered savings accounts, there is a new, tax efficient way to make these contributions called Qualified Charitable Distribution (QCD). 

This QCD provision was new for 2021.  It is limited to $100,000 per person ($200,000 for a couple) but each party in the marriage is limited to $100,000.  The contribution must be made directly to the charity from your tax-sheltered vendor.  The vendor can either mail the check directly to the charity or send you the check to you (made out to the charity) which you can take to the charity. 

The charity must be one that is approved by the IRS. You can't simply turn the money over to a friend or neighbor. Eligible charities include 501(c)(3) organizations and houses of worship. Donor-advised funds and so-called supporting organizations are not permitted to receive QCDs on a tax-advantaged basis.

The advantage is that nothing appears on your tax return – no income is recorded for the RMD and no itemized deduction is allowed, and your RMD is satisfied.  Unless your other itemized deductions exceed the standard deduction, you don’t get the full benefit of the charitable deduction. 

As an example let’s assume that your other itemized deductions equal $18,000 and you are required to take a $10,000 RMD which you take, and make a $10,000 charitable contribution with it.  Assume you are married, both over 65 and your other taxable income is $100,000.  In this case your standard deduction for 2021 would be $27,800.


                                                                                     No QCD                Make QCD

Other income                                                               100,000                    100,000

RMD                                                                               10,000                              -      

Gross taxable income                                                  110,000                    100,000


Deduct Larger of itemized

Deduction/standard deduction                                       28,000 (ID)         27,800 (SD)

Taxable income                                                              82,000                 72,200                                                                                                                                   Tax liability                                                          $ 8,923                 $7,567