Supporting causes you care about is rewarding. What can make it feel even better, though, is accomplishing this while also considering your long-term retirement goals.
For many Wisconsin retirees, charitable giving isn’t only about generosity, it’s also about being intentional with every dollar, especially when living on a fixed income or managing required minimum distributions (RMDs).
You may already donate regularly to your favorite organizations. But what if you could also lower your taxable income in the process? That’s where tax-efficient giving strategies—like qualified charitable distributions (QCDs)—enter the picture. These approaches allow you to align your philanthropic goals with your financial plan, ensuring your generosity has the greatest impact for both you and those you’re looking to help.
What Is a Qualified Charitable Distribution (QCD)?
A qualified charitable distribution, or QCD, happens when funds are sent directly from your IRA to a qualifying charity. The IRS allows this type of gift starting at age 70½, which means you can give directly from your retirement account without those dollars ever showing up in your taxable income.
Only certain retirement accounts qualify – most often a traditional IRA. Other account types, like a 401(k) or 403(b), aren’t eligible for QCDs unless you roll them into an IRA first. This is important because QCDs can count toward all or part of your required minimum distribution (RMD) once you turn 73.
The 2025 annual limit for QCDs is $108,000 per person. If married couples each have separate IRAs, they can each contribute up to the QCD limit. This can make a meaningful difference for households looking to reduce the tax impact of RMDs. Moreover, you also have the option of making a one-time contribution of $54,000 in 2025 through a QCD to a charitable remainder trust or charitable gift annuity.1
Unlike taking a withdrawal and then writing a check to charity, a QCD is structured so the money moves straight from your IRA custodian to the charity. This is the key to unlocking the tax benefit; those funds never become part of your reported income.
Please Note: QCDs can be made from a Roth IRA if you’re age 70½ or older, but they don’t typically provide notable benefits since Roth withdrawals are already tax-free and Roth IRAs have no lifetime RMDs for the original owner. For inherited Roth IRAs, most beneficiaries must empty the account within 10 years, and a QCD can count toward any annual RMDs required under the life-expectancy method.
What About QCDs From Inherited Traditional IRAs?
Beneficiaries of inherited traditional IRAs can make qualified charitable distributions (QCDs) as long as they are age 70½ or older. The annual QCD limits apply the same whether the account is one you own or one you’ve inherited.
A QCD from an inherited IRA can also count toward the required minimum distribution (RMD) that must be taken from the account. This can be especially useful if you don’t need the extra income but still face mandatory withdrawals.
Additionally, the same rules apply as with any QCD: the transfer must go directly to a qualified 501(c)(3) charity, and the funds cannot be directed to donor-advised funds, private foundations, or supporting organizations. Inherited employer plans like 401(k)s or 403(b)s are not eligible for QCDs unless the funds are rolled into an IRA first.
Please Note: RMD rules for inherited IRAs (traditional or Roth) can vary based on your relationship to the original account holder and your potential status as an “eligible designated beneficiary.” Because these rules are complex, it’s a good idea to review the IRS’s current guidance on inherited IRAs and work with a financial professional to understand how QCDs may fit into your inheritance situation.2
How QCDs Reduce Your Tax Bill
A QCD can be more than just a way to support your favorite causes—it can be a smart tool for managing your retirement taxes. Here’s why:
Avoiding taxable income: When you take a normal IRA withdrawal, the amount is added to your taxable income for the year. A QCD bypasses that. Since the money is sent directly to the charity, it doesn’t count as income to you, which means it won’t raise your tax bill.
Lowering adjusted gross income (AGI): Reducing your AGI can have a ripple effect. A lower AGI can help limit how much of your Social Security benefits are taxed, reduce Medicare IRMAA surcharges, and help you qualify for certain deductions or credits that phase out at higher income levels.
Compared to charitable deductions: In the past, taking the standard deduction meant no tax break for charitable giving, which made QCDs especially useful. However, starting in 2026, the One Big Beautiful Bill (OBBB) changes things by adding an above-the-line write-off of up to $1,000 for individuals or $2,000 for couples on cash gifts to qualified public charities. For itemizers, new restrictions apply: only amounts above 0.5% of AGI count, and top-bracket taxpayers are limited to a 35% deduction rate.3 While this expands charitable tax benefits, QCDs still stand apart by keeping IRA transfers out of taxable income entirely and applying toward RMDs.
Other Rules and Restrictions to Keep in Mind
QCDs can be an incredibly helpful strategy, but they have specific rules you need to follow:
Eligible charities: Only IRS-qualified 501(c)(3) organizations count. Donor-advised funds (DAFs), private foundations, and supporting organizations are not eligible for QCDs.
Direct transfer requirement: While the transfer must be made payable directly to the charity to qualify as a QCD, many custodians will issue the check in the charity’s name and mail it to the account holder for delivery. This process still meets IRS requirements, as long as the check is written to the qualified charity—not the individual—and then given to the organization. This approach can also help donors keep better records and confirm receipts for tax purposes in case of an audit.
Year-end completion: Your QCD must be completed by December 31st for it to count toward that year’s taxes and RMDs. Waiting too long in the year can risk missing the deadline.
Recordkeeping requirements: Keep the acknowledgment letter from the charity that confirms your gift. This documentation is important for tax reporting.
Restrictions for IRA account types: QCDs generally can’t come from active SEP or SIMPLE IRAs. To qualify, the account must have had no employer contributions during that plan year, or the funds must be rolled into a traditional IRA first.
When a QCD May Be More Advantageous Than Other Giving Strategies
QCDs tend to shine for retirees who must take RMDs but don’t need the extra income. Instead of increasing taxable income with an unwanted distribution, you can redirect it to a charity and reduce your tax liability in the process.
They’re also a strong fit for donors who no longer itemize deductions. Since the tax benefit comes from excluding the income rather than claiming a deduction, you still get a financial advantage without having to change your filing method.
Lowering AGI can also help with other costs tied to income such as Medicare IRMAA surcharges or the taxation of Social Security benefits. This makes QCDs worth considering if your income is near a threshold that would increase these expenses.
Step-by-Step Process for Making a QCD
If you’re thinking about using a QCD, following the right steps can help keep the process smooth and compliant:
Step 1: Confirm eligibility: You must be at least 70½ and have an eligible account, typically a traditional IRA.
Step 2: Select an eligible charity: Choose an IRS-qualified 501(c)(3) organization. If you’re not sure, you can check an organization’s status using the IRS Tax Exempt Organization Search tool.4
Step 3: Work with your IRA custodian: Request that your custodian issue the distribution as a check made payable directly to the qualified charity. In many cases, the check will be sent to you so you can deliver it to the organization. This structure ensures the funds are treated as a QCD and not counted as taxable income to you.
Step 4: Obtain acknowledgment: Obtain written confirmation from the charity acknowledging your gift. This will serve as your proof for tax purposes.00000
Step 5: Keep tax records: Retain the acknowledgment letter or receipt from the charity confirming your gift, as this documentation is required in the event of an audit. It’s also a good idea to keep any confirmations from your IRA custodian to show the distribution was payable directly to the charity. Together, these records support accurate reporting of your QCD.
Other Tax-Efficient Giving Strategies You Should Consider
While QCDs are powerful, they aren’t the only way to give strategically in retirement. Other approaches can complement or even work better depending on your assets and tax situation:
Donating appreciated securities: Giving stocks, mutual funds, or other investments that have grown in value can allow you to avoid capital gains tax while still receiving a charitable deduction if you itemize.
Bunching charitable contributions: Combining multiple years’ worth of donations into a single tax year can push your total giving high enough to exceed the standard deduction, making it possible to claim itemized deductions that year.
Charitable remainder trusts: These trusts pay income to you or another beneficiary for a set time, with the remaining assets going to charity afterward. They can be especially useful for turning appreciated assets into income without immediate capital gains tax.
Donor-advised funds (DAFs): You can contribute a lump sum to a DAF in one year, claim the deduction, and then suggest grants to charities over time.
Annual gift tax exclusion: Separate from charitable giving, you can give up to a certain amount each year directly to individuals without triggering gift taxes, helping reduce the size of your taxable estate.
QCDs and Other Tax-Efficient Giving Strategies FAQs
Can I make a QCD from my 401(k) or 403(b)?
No. QCDs can only be made directly from an IRA. If your retirement savings are in a 401(k) or 403(b), you’d first need to roll funds into an IRA before making a QCD. This extra step has its own process and timeline, so if you’re considering a rollover, it’s best to plan ahead and coordinate with both your plan administrator and IRA custodian.
How much can I give through QCDs annually?
For the year 2025, the federal limit is $108,000 per person, per year. For couples filing jointly, each spouse can make a QCD up to the limit as long as they have separate IRAs. That means a couple could potentially direct $216,000 to charity in a single year while reducing their taxable income.
Do QCDs count toward my RMD?
Yes. This is one of their most appealing features for retirees who don’t need the extra income. A QCD can satisfy all (or part) of your annual required minimum distribution without adding to your taxable income. For example, if your RMD for the year is $20,000 and you give $15,000 through a QCD, you’d only need to withdraw the remaining $5,000 to meet the requirement.
Can I take a charitable deduction for a QCD?
No. The tax advantage of a QCD is that the distribution is completely excluded from your taxable income. This can often be more advantageous than taking a deduction, especially if you use the standard deduction and wouldn’t otherwise itemize your charitable giving.
Are donor-advised funds (DAFs) eligible for QCDs?
No. The IRS does not allow QCDs to go to donor-advised funds, private foundations, or certain supporting organizations. The funds must be sent directly to a qualifying public charity to stay in line with IRS rules.
What is bunching donations and when is it useful?
Bunching involves making several years’ worth of charitable contributions in one tax year so the total exceeds the standard deduction, letting you itemize and claim a larger deduction. In off years, you’d take the standard deduction.
This approach can be especially useful when you expect higher taxable income in a given year—such as after a Roth conversion, selling appreciated assets, or taking a large distribution—because the larger deduction can help offset that spike. It can also be paired with tools like donor-advised funds to pre-fund future giving while concentrating the tax benefit into the year it’s most valuable.
Do Wisconsin tax rules differ from federal rules on QCDs?
Generally, no. Wisconsin follows the same tax treatment as the federal government for QCDs. That means your QCD amount isn’t included in your state taxable income either, offering a double benefit for Wisconsin retirees.
Are charitable remainder trusts a fit for most retirees?
They can be a powerful giving tool for retirees with larger estates or appreciated assets. A charitable remainder trust can give you or another beneficiary income for life or for a set term, with the remaining assets going to charity.
These trusts require careful planning, legal setup, and ongoing administration, so they’re usually best suited for individuals making significant charitable gifts while also seeking lifetime income.
Making QCDs and Other Tax-Efficient Giving Strategies Work for You
For Wisconsin retirees, QCDs offer a straightforward way to give generously while keeping your taxable income in check. They can help you meet RMD requirements, lower your AGI, and create more space in your budget for the things that matter most in retirement.
Leveraging other charitable giving strategies, like donating appreciated stock or using a donor-advised fund, can give you even more flexibility. The right mix depends on your income sources, the assets you hold, and your long-term goals for both giving and retirement income. The best strategy is often the one that works for you year after year, not just for a single tax season.
If you’re interested in exploring how QCDs or other giving tools could fit into your plan, our Wisconsin-based team can help you map out the details. We’ve worked with many retirees who wanted to make a meaningful impact through their giving while also staying mindful of taxes. Schedule an introductory call with our team to learn more.
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