Did you know retirees can give up to $100,000 to charity tax-free from an IRA and lower their income taxes in the process? If you are over the age of 70 ½, the government requires you to take annual distributions (withdrawals) from your retirement account—a provision known as the required minimum distribution (RMD). Up to a certain amount, these distributions may be made tax-free as long as they are directed to a qualified 501(c)(3) organization, an option known as the qualified charitable distribution (QCD).


Individuals 70 ½ or older with traditional, rollover and Roth IRAs; or SEP and Simple IRAs (as long as you are no longer actively receiving employer contributions). Employer-sponsored plans do not qualify.


By directing your IRA distribution to a charity, you effectively subtract the distribution from your overall income. This lowers the amount that’s subject to income tax. The rules allow you to save on taxes and, as a result, donate more if you want. For example: A $10,000 donation could thus escape $2,500 in income tax, assuming a 25 percent tax bracket, and the donor could therefore give the entire $10,000 rather than $7,500 to charity if some had to be held back for taxes.

Charitable distributions are great for individuals who:

Take the standard deduction instead of itemizing
Want to lower their Adjusted Gross Income (which can reduce the portion of their Social Security benefit that is taxed and help avoid the Medicare surcharge on high incomes)
Want to support their favorite causes in other ways

To be tax free, the donation must go directly from the retirement account to the charity without passing through the investor’s hands. Talk to your retirement plan administrator to get started. Your company or brokerage may require a form or letter from you with the name, address and phone number of the charity and the information necessary for the broker to arrange an electronic transfer of either securities or money directly from your account to the charity’s account.

As always, talk to your financial adviser to see what is the best for your financial situation.


Please call us at 415-274-6750. This is a great way to take full advantage of your retirement account while supporting a cause that is important to you. We’re happy to help.

COMMONLY ASKED QUESTIONS (adapted from Kiplinger.com)

What is a Required Minimum Distribution (RMD)?

Upon turning 70 ½, retirement account holders are obligated to take annual distributions (withdrawals) from their accounts. These mandatory withdrawals are known as the required minimum distribution (RMD). If you do not take any distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the required amount not distributed.

Why do I have to take the RMD?

When you put money into your retirement plan account on a pre-tax basis, you have not yet paid taxes on it. In addition, you also receive a tax deduction if you save in an IRA. When your account grows, it continues to grow tax-deferred. To ensure that taxes are eventually paid on this money, the IRS has determined that distributions must begin (and income taxes be paid) at age 70 ½ in a specific schedule.

What is a Qualified Charitable Distribution (QCD)?

Up to $100,000 of your annual RMD from IRAs may be distributed directly to a 501(c)(3) public charity, enabling you to avoid paying income taxes on that amount. This option is known as a qualified charitable distribution (QCD).

The QCD applies to traditional, rollover and Roth IRAs. SEP and Simple IRAs also qualify (as long as you are no longer actively receiving employer contributions). Employer-sponsored plans do not allow for QCD treatment.

I’ll be 70½ in a few months. Can I give my RMD to charity now?

Even though you can take your RMD anytime during the year you turn age 70½ (or until April 1 of the year after you turn 70½), you have to wait until you actually turn age 70½ to make the tax-free transfer to charity. See Taking Your First Required Minimum Distribution for more information.

Can I give my 401(k) RMD to charity?

No. You can only make the tax-free transfer from an IRA, not from a 401(k).

Can I withdraw the money from my IRA and then write a check to charity, or do I need to transfer the money directly?

The tax-free transfer won’t count if you withdraw the money from the IRA first and then make a contribution to the charity. You can take a charitable deduction for your contribution in that case, but the IRA withdrawal will be included in your adjusted gross income.

You need to transfer the money directly from the IRA to the charity for it to count as the tax-free transfer. Ask your IRA administrator and the charity about making a direct transfer, or you can have the IRA administrator send a check from your account to the charity. If you have check-writing privileges for your IRA, you can write a check to the charity. Give the charity a heads-up, so it knows the contribution came from you and can send you an acknowledgement.