90% of Americans miss this simple tax trick that can slash RMD pain — don’t be one of them

Global Desk Many retirees like to give money to charities during the holiday season, and there’s an IRS-approved way to do that while paying less tax — it’s called a Qualified Charitable Distribution. A QCD means donating money directly from your IRA (retirement account) to a charity. You don’t take the money out first, so it never counts as taxable income.Ashton Lawrence, a certified financial planner at Mariner Wealth Advisors in Greenville, South Carolina, told CNBC, “It’s one of the IRS’ best-kept secrets for retirees.” Normally, when you withdraw money from your IRA and then donate it, that money is added to your income, which can raise your tax bill. But with a QCD, the money goes straight to the charity, so it stays off your tax return completely.Simple tax trick for retireesFidelity says QCDs are good for people who are 70½ or older, already taking RMDs, and do not list itemized deductions on their taxes. They also work best for people who have large IRA savings. In 2025, the IRS lets people aged 70½ or older give up to $108,000 through a QCD. Married couples can each give $108,000.The Secure Act 2.0 now lets that $108,000 cap rise with inflation every year, so it won’t stay fixed forever. According to the IRS, about 91% of Americans take the standard deduction instead of itemizing. That means most people’s regular donations don’t lower their taxable income because they’re not claiming them as itemized deductions.A QCD solves that problem because the donation never becomes taxable income at all — “better than a deduction,” said Juan Ros, CFP and partner at Forum Financial Management in Thousand Oaks, California. Once you turn 73, you must start taking Required Minimum Distributions (RMDs) from your retirement accounts, even if you don’t need the money. If you skip it, the IRS charges a penalty.Live EventsHow to use a QCD the right wayA QCD lets you donate part or all of your RMD directly to a charity, which both fulfills the RMD rule and avoids paying taxes on that amount. “For my philanthropic clients, it’s almost a no-brainer,” said Jim Guarino, CFP and managing director at Baker Newman Noyes in Woburn, Massachusetts. To make a QCD, you must have an IRA. If your retirement savings are still in a 401(k) or another employer plan, you need to roll it over into a traditional IRA first.Most 401(k) plans allow you to transfer funds into an IRA. Once that’s done, you can ask your IRA custodian to send the donation directly to a qualified charity. It’s important that the money goes straight from your IRA to the charity — not through you — or else it could become taxable income. Timing is key. The IRS says rollovers should be completed within 60 days to avoid penalties.You cannot use QCDs for donor-advised funds or private foundations. You must make sure the charity is a qualified 501(c)(3) group before sending money. If you move your 401(k) or other savings into an IRA, you can still get all the QCD tax benefits, even if your account was not eligible before. To qualify, you must be at least 70½ years old when the money leaves your IRA, and note that SEP and SIMPLE IRAs aren’t eligible for QCDs.Always ask your IRA company to send the money straight to the charity — not to you first. Make sure the charity is a real 501(c)(3) group and save all your receipts for tax time. QCDs are not counted as income on your federal taxes, but state rules can be different. Some states follow the IRS rules, but some do not. So, it’s smart to ask your state tax office or a tax expert before donating. For retirees, a QCD is a good way to give to charity and save on taxes. It helps meet RMD rules, reduces taxable income, and supports favorite causes.FAQsQ1. What is a Qualified Charitable Distribution (QCD)?A Qualified Charitable Distribution is a tax-free donation made directly from your IRA to a charity, helping retirees lower their taxable income.Q2. Who can use a QCD to reduce taxes?Anyone aged 70½ or older with an IRA can use a QCD to donate up to $108,000 a year and reduce their Required Minimum Distribution tax impact.Add as a Reliable and Trusted News Source Add Now! (You can now subscribe to our Economic Times WhatsApp channel) Read More News onretiree tax savingsQualified Charitable DistributionQCD tax benefitIRA donationsIRS retirement ruleRequired Minimum DistributionRMD tax reductioncharitable giving for retireesSecure Act 2.0IRA charitable tax trick (Catch all the US News, UK News, Canada News, International Breaking News Events, and Latest News Updates on The Economic Times.) Download The Economic Times News App to get Daily International News Updates....moreless (You can now subscribe to our Economic Times WhatsApp channel)Read More News onretiree tax savingsQualified Charitable DistributionQCD tax benefitIRA donationsIRS retirement ruleRequired Minimum DistributionRMD tax reductioncharitable giving for retireesSecure Act 2.0IRA charitable tax trick(Catch all the US News, UK News, Canada News, International Breaking News Events, and Latest News Updates on The Economic Times.) Download The Economic Times News App to get Daily International News Updates....moreless