Your Required Minimum Distribution + A Qualified Charitable Distribution = a Win-Win
Did you know there is a simple way to reduce your taxable income and give money to your favorite charities? Consider donating part or all of your required minimum distribution (RMD) from your tax-deferred retirement account, such as a IRAs or a 401(k), through a qualified charitable distribution (QCD). The RMD and QCD can work together for the benefit of you and your favorites charities.
What are the RMD and QCD?
An RMD is the annual minimum amount you must withdraw from your retirement account once you reach a certain age. This amount is counted as income and is therefore taxable. The minimum age at which you must take the RMD is 73; in 2033 that increases to 75.
The QCD is an annual amount an individual who is over 70½ years old can donate, tax free, from specific retirement plans directly to one or more nonprofits that counts toward fulfilling their RMD. The net effect is to reduce the taxable amount withdrawn from the retirement account and make donations to charities. A QCD can be a great way to satisfy the RMD without increasing your tax bill.
How Does this Work?
For 2025, the QCD maximum amount is $108,000 per individual or $216,000 for married couples filing jointly. Please note that this limit applies to the sum of all QCDs taken from all IRAs in a year. By making a QCD to an eligible charity, such as the Minneapolis Jewish Federation, the money is not included in your gross income and is not federally taxed, leaving the full amount for charitable purposes. The QCD must be completed by the annual RMD deadline, typically December 31.
Interested in using the QCD to continue your giving to the Minneapolis Jewish Federation after your lifetime? A QCD can be used to create a lasting legacy through a Perpetual Annual Campaign Endowment Fund or a Lion of Judah Endowment Fund (either perpetual or for a specific period of years), or to make a one-time gift to the Federation’s general endowment fund. If you’re interested in leaving a meaningful legacy to support our Jewish community, this can be a tax-smart way to make the gift of a lifetime. Join the Federation’s Legacy Society when you give a legacy gift that secures a Jewish future for our community.
Another option for donors who are 70 years and older who are interested in generating additional income, is to make a one-time IRA QCD up to $54,000 to fund a charitable gift annuity or charitable remainder trust (CRT). NOTE: no other assets can be added to the CGA or CRT and this can only be done once in a lifetime.
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How this Helps Your Estate
Because IRAs can be heavily taxed when passed on to heirs, many donors choose to make QCDs during their lifetime—reducing future tax burdens while creating meaningful impact now.
How this Helps Your Community
A QCD allows you to give more generously than you might have thought possible, and it makes a difference in the community right away, when you can see and enjoy the impact of your giving.
How Do I Make a QCD?
Individuals must select the eligible charity (an IRS-recognized 501(c)(3)), specify the amount, and authorize the IRA custodian to transfer funds directly to the eligible charity. The funds do not pass through the individual’s hands, but sent directly to the charity, ensuring compliance with QCD guidelines. please contact Alene G. Sussman at agsussman@mnjcf.org or 952.417.2316 to let us know if you want to use this gift for a specific purpose. -
Which Charities Are Eligible?
Not all charities are eligible for these tax-free transfers. Donor-advised funds, supporting organizations, and private foundations are NOT qualified recipients of a QCD. However, you can choose to take a distribution from your IRA, declare it as income, and then gift it to your donor-advised fund. You will be taxed on the income, but you can still receive a charitable deduction for the gift.
Are There Retirement Plans That Are Not Eligible?
Distributions from employer-sponsored retirement plans, including SIMPLE IRA and SEP plans, are not eligible.
To learn about other ways to strategically plan gifts, please contact Alene G. Sussman at agsussman@mnjcf.org or 952.417.2316.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Please consult your own tax, legal, and accounting advisors about your specific circumstances before engaging in any transaction.