From time to time, I see an enthusiastic tip about how neat it is to make one's charitable contributions from one's IRA, in lieu of taking all or a part of one's RMD.

I don't see the point. The simplest is to just write checks. Declare the IRA income, declare the charitable contributions (CCs). The CCs made from the IRA wipe out taxable income to the same extent that just writing check(s) does.

I think that making the CC from the IRA reduces one's AGI, which can have several effects. (Correct?) Pro: A smaller AGI may reduce or even eliminate one's 3.8% tax on investment income. Con: A smaller AGI reduces the amount of charitable deduction allowed (if cash, used to be 50% of AGI, then 60% of AGI and now, temporarily, 100% of AGI. 30% of AGI for stocks, plus some other rules.) This could mean that part of the CCs have to be carried forward, thus deferring some of the tax savings to the next year.

Another con: writing a check is simple. Making a CC from one's IRA could be more complicated. I may or may not have check-writing privileges on my IRA; I've never asked.

What am I missing?

2 Answers 2


The big reason that somebody would do this is to turn a non-tax-deductible contribution into a tax-deductible contribution.

Ignoring the special charity deduction rules of 2020 and 2021 where a standard deduction tax payer could claim a $300 or $600 charitable deduction, the taxpayer who uses the QCD (Qualified Charitable Distributions) process can have some of their required charitable contributions as non-taxable even if they don't itemize.

Lets say a taxpayer likes to make a $5,000 contribution to their favorite charity. If they send the money from their regular bank account, they can only save on federal taxes if they itemize. But if they have the custodian pull the money from the IRA, and then have the custodian send the money to the charity. The $5,000 counts as part of the required IRA distribution, but it doesn't count as income on their Federal tax forms. It makes it essentially tax-deductible, even though they can't include Schedule A.

Here is an example:

  • Married couple, retired, in their mid seventies. So they can do a QCD and must make a RMD of 50K.
  • They have State and local taxes of greater of $10,000 so it is capped at $10,000
  • They don't have a mortgage, so they can't deduct interest.
  • The donate $5,200 to charity.
  • They are in the 22% tax bracket.
  • Their standard deduction is: $27,800 (both are over 65)

Option 1:

  • They take the RMD of $50,0000 and then from their checking account they donate $100 a week to their church or $5,200.
  • They can include $15,200 on Schedule A.
  • Therefore they take the standard deduction of $27,800

Option 2:

  • They take the RMD of $50,0000.
  • But they direct $5,200 be sent to their church via the QCD.
  • The rest of the RMD $44,800 is sent to their checking account,
  • They can include $15,200 on Schedule A.
  • Therefore they take the standard deduction of $27,800
  • But their taxable income has been reduced by $5,200.

If they tax Option 2, that reduced taxable income saves them :

0.22 x $5,200 = $1,144

But lets say they want to give $25,000. That means they will itemize and their deduction will be $35,000. But if they take the standard deduction and use the $25,000 they reduce their income by (27800+25000) $52,800.

That would save them

0.22 x $17,800 = $3,916

Not bad for 15 minutes of work each year.

So they can save money even if they could have itemized.

But it is a wash if they would have itemized even if they made no charitable deductions.

  • Thanks. If I read your answer correctly, there is a benefit to contributing from your IRA as opposed to simply writing a check ONLY if you are NOT itemizing. RIght?
    – ab2
    Nov 2, 2021 at 22:13
  • 1
    Note you can only do QCD if you are at least 70.5. That used to be the same age you must take RMD -- and yes QCD counts as RMD, but so does taking the distribution yourself and then donating it, so that's not a difference -- but the RMD age has now been increased to 72. Nov 3, 2021 at 2:51

The answer by mhoran_psprep has the major reason why QCDs might be preferred over taking the RMD in cash and making donations to charities directly and writing off the charitable donations as itemized deductions, but there are other considerations too. The OP has cited one reason in his question itself: QCDs reduce AGI and thus might reduce or eliminate the 3.8% tax on investment income. (It is worth keeping in mind that distributions from IRAs are not investment income and so the 3.8% tax does not apply to RMDs or additional distributions over and above the RMD that might be taken.)

Another reason for reducing AGI is that Medicare recipients have to pay premiums to Medicare and the amount increases with the AGI (actually a modified AGI called MAGI is used). For example, for 2021, a married person filing jointly has a basic Medicare Part B Premium of $148.50 per month but pays $59.40 extra if the 2019 income tax return showed a MAGI above $176K, $148.50 per month extra if MAGI was above $222K, and so on, topping out at $356.40 per month extra if the 2019 MAGI was above $750K. For single persons, Heads of Households and Qualifying Widow(er)s, the $356.40 per month extra is reached at $500K of 2019 MAGI, etc. Similarly, premiums for Medicare Part D (drug coverage) also increase with increasing AGI. (The reason why 2019 MAGI is used in setting premiums for 2021 is that Medicare premiums are announced in December for the following year, and in December 2020 when the 2021 premiums were announced, the IRA knew only about 2019 AGI; the 2020 return was still to be filed). So, there is incentive to reduce AGI if possible, and QCDs allow senior citizens to do so.

Yet another reason why senior citizens might prefer QCDs is that many of them don't have enough itemized deductions at this time of their life. Many have paid off their houses and there is so no mortgage interest deduction, the new tax law limits State and Local tax (SALT) deductions to $10K, there are no Miscellaneous Deductions any more, and so unless the charitable deductions are considerable, it is better to take the standard deduction (which is much larger than it used to be just a few years ago) instead of itemizing. But this brings up an interesting strategy for seniors of RMD age: make your charitable donations as QCDs, take the standard deduction and you get the benefit of double dipping; your AGI is reduced by the QCDs, the charities get the same amount of money as you would have given them anyway, and your taxable income is reduced by the standard deduction (which was increased to resemble what the typical amounts used to be on previous Schedule A filings: some mortgage interest, some state and property tax, and a few charitable donations, plus the personal exemptions which disappeared in the latest version of the tax law).

  • THanks, excellent points.
    – ab2
    Nov 4, 2021 at 20:11

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