What Is a Qualified Charitable Distribution (QCD)?

QCDs are one of the most tax-efficient charitable giving strategies available to retirees. By transferring IRA funds directly to charity, you avoid the income tax that would otherwise apply to an RMD, keep your Adjusted Gross Income (AGI) lower (which can reduce Social Security taxation, Medicare IRMAA surcharges, and the taxation of other income), and still receive the satisfaction of charitable giving.

For Arizona retirees who are charitably inclined, QCDs are particularly valuable because they provide tax benefits even if you take the standard deduction — which is now the case for the majority of filers since the 2017 Tax Cuts and Jobs Act roughly doubled the standard deduction.

Eligibility: You must be age 70½ or older. The distribution must come from a traditional IRA (not a 401(k), 403(b), or other employer plan — though you can roll employer plan funds into an IRA first).

Annual limit: $105,000 per person per year (2026, indexed for inflation). Married couples with separate IRAs can each contribute up to $105,000.

How to execute: Contact your IRA custodian and request a direct transfer to the qualified charity. The check must be made payable to the charity — not to you. If you receive the funds personally and then donate them, it does not qualify as a QCD.

RMD satisfaction: QCDs count toward your Required Minimum Distribution for the year. If your RMD is $25,000 and you make a $25,000 QCD, your entire RMD is satisfied with zero taxable income.

Tax reporting: The QCD is reported on Form 1099-R as a normal distribution, but you report it as a QCD on your tax return (Form 1040, line 4b = $0 if the entire distribution was a QCD). Keep acknowledgment letters from charities.

What doesn't qualify: Donor-advised funds, private foundations, and supporting organizations are not eligible QCD recipients.

Arizona's 2.5% flat tax applies to RMD income, so QCDs provide state tax savings in addition to federal benefits. Arizona also offers generous state tax credits for charitable giving (up to $841 per couple for qualifying charitable organizations and up to $1,352 for school tuition organizations). QCDs and Arizona charitable tax credits can work together as part of a comprehensive charitable giving strategy.