Reducing RMDs With QCDs
For retirees who've accumulated significant savings in their tax-deferred accounts, the onset of required minimum distributions (RMDs) at age 73—or 75 for those born in 1960 or after—can have serious tax consequences. That's because the higher the balance in your tax-deferred accounts, the higher your RMDs—and potentially your tax bracket.
If charitable giving is part of your financial plan, a qualified charitable distribution (QCD) can further your philanthropic goals and help reduce the tax hit from your RMD.
Charitable donations: Cash vs. QCD in 2025
Taking your full RMD and then donating cash could result in a higher tax bill than if you were to give through a QCD. Let's look at an example of when a QCD could make sense. Say you're 75 years old and single, and you need $125,000 in income this year to cover your living expenses. Your RMD for the year is $110,000 and you'll receive another $50,000 from a pension and Social Security—pushing your total taxable income to $160,000. That leaves you with an additional $35,000 of income that you don't need.
If you're charitably inclined, you could donate the excess cash to your favorite charity and write-off the amount on your tax return. But by using a QCD to transfer the $35,000 directly to a charitable organization, you could potentially pay $4,260 less in income taxes.
Scenario 1
Take full RMD and donate $35,000 in cash
Pension and Social Security Benefits: $50,000
RMD: + $110,000
QCD: $0
Adjusted gross income: = $160,000
Itemized deduction: – $35,000
Taxable income: = $125,000
Estimated taxes due: $22,847
Scenario 2
Donate $35,000 of RMD directly to charity using a QCD
Pension and Social Security Benefits: $50,000
RMD: + $110,000
QCD: – $35,000
Adjusted gross income: = $125,000
Standard deduction: – $17,750
Taxable income: = $107,250
Estimated taxes due: $18,587
Note: The estimated tax impact and discussions herein are not intended as tax advice. Itemized deduction assumes the cash donation only and does not include other deductions. Tax calculations are estimated using 2025 federal tax brackets, do not reflect state taxes, and assume that 85% of Social Security benefits are taxable. In 2025, the standard deduction for a single filer age 65 and older is $17,750 ($15,750 standard deduction plus $2,000 additional standard deduction).
You don't necessarily want to give away money just to get a tax break. But if philanthropy is already part of your financial plan, a QCD can be a great way to optimize the tax benefits of giving. Your financial advisor and tax professional can help make sure your giving strategy aligns with your retirement goals as well as any changes to tax rules.