In most years, many individuals who are over age 70 ½ must take an annual Required Minimum Distribution (RMD) from their tax-advantaged retirement plans before year-end.

The government established this rule to ensure income taxes get paid from tax-deferred retirement plan contributions, such as IRAs, 401(k)s and 403(b)s. To calculate the RMD, a formula based on life expectancy is applied to your retirement plan balance.

In 2006, to help offset the RMD income tax burden from taxpayers and to encourage charitable giving, Congress introduced Qualified Charitable Distributions (QCDs).

QCDs allow a taxpayer over age 72 to donate up to $100,000 total to one or more charities directly from a taxable individual retirement account (IRA) instead of taking an RMD. As a result, you may avoid being pushed into a higher income tax bracket and prevent a phaseout of other tax deductions.

In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan to skip those RMDs. That provision was not extended.

Is a QCD Right for Me?

How can you determine if a QCD is right for your financial planning objectives and charitable giving?

Below are a few things to consider.

If you have to take an RMD but don’t want or need the money, a QCD up to $100,000 can be an effective solution by transferring the minimum required amount out of your IRA directly to charity as a gift or donation. You can avoid paying income tax on the distribution, as is required if you take the distribution directly. A 50 percent excise tax is the penalty for not taking your RMD.

A QCD also can be a good strategy during a year when all or part of your traditional IRA is being converted to a Roth IRA. In the year of the conversion, you still are required to take your RMD for the year, regardless of when the conversion is done during the year. You won’t be able to convert the RMD amount. Without the QCD, you’d have to include the RMD in gross income along with the converted amount.

The alternative is to make a QCD with the RMD amount. That keeps the RMD amount out of your gross income.

Lastly, QCDs can be used to help keep adjusted gross income (AGI) and taxable income within a desired range, as income from a charitable distribution “bypasses” your Form 1040. That is, you will still report the full amount of the 1099 income on your Form 1040 on the line for IRA distributions but will enter “QCD” next to the amount donated, which may net zero as the taxable amount if the full distribution was a QCD.

This can help prevent your income from reaching the thresholds for the net investment income tax and from disqualifying for other tax breaks.

Where Can I Give a QCD?

Although federal law does not permit donor-advised funds to accept QCDs, a gift of this type does represent an opportunity for donors to support scholarship, field-of-interest or donor-designated funds, including programs and funds at The San Diego Foundation, such as:

Strategic Initiatives Fund

The benefit of 15 months of work on the COVID-19 Community Response Fund included witnessing first-hand the pre-existing and mounting inequities in our communities through the work of our nonprofit partners. In launching our new Strategic Plan for just, equitable and resilient communities in June 2021, it was with the knowledge and experience of the long-term health, economic and educational impacts of COVID-19, and pre-existing equity gaps in our communities.

By donating to our Strategic Initiatives Fund, you are making a difference in advancing racial and social justice, fostering equity of opportunity, and building resilient communities in San Diego.

Black Community Investment Fund

Co-founded by the Central San Diego Black Chamber of Commerce and The San Diego Foundation in 2020, The Black Community Investment Fund prioritizes and invests in community-led, innovative efforts that increase racial equity and generational wealth for Black San Diegans.

Within the last year, we have raised and leveraged $3.1 million and granted and committed $3 million to impact economic prosperity among Black San Diegans. Donate today to help make San Diego County a better, stronger and more equitable region so every San Diegan can thrive, prosper and feel like they belong.

Community Scholars Initiative

Despite their talent and aspirations, first-generation, low-income, and underrepresented students face unique and considerable barriers to achieving their academic dreams. Launched in 2018, the Community Scholars Initiative is a partnership with local nonprofits that focuses on college access and readiness programs to help low-income and first-generation students prepare for, pay for and persist through college. 

Donate today to help provide financial support and critical wraparound services that bolster academic achievement through need-based scholarships for students, and grants to nonprofit organizations preparing students for success in the college environment.


Click here to see a list of The San Diego Foundation programs and funds that can accept QCDs.

Please also consider contacting our Donor Services Team at (619) 814-1332 or donorservices@sdfoundation.org to review your charitable and income tax planning.

As part of your team of advisors, we can help you determine the best way to take your QCD and meet your charitable goals.