As more and more baby boomers surpass age 73 each year—the age for mandatory individual retirement account (IRA) distributions—they are confronted by the need to take a required minimum distribution (RMD) from their IRA annually or pay a steep penalty.
If an IRA owner does not want their full RMD counted as income come tax season, they have the option to donate up to $108,000 per individual (2025 limit, indexed for inflation) from an IRA directly to a qualifying charity. The distribution counts toward the RMD, but the assets are not recognized as income. This technique, known as a qualified charitable distribution (QCD)—or, more colloquially, a charitable IRA rollover—is a well-established, easy, and popular giving option available to IRA owners age 70½ or older.
Many individuals donate their QCD directly to a qualifying nonprofit of their choice to provide immediate operational support. This approach makes sense in the case of smaller annual QCDs, but if individuals are considering donating tens of thousands of dollars to charities in a given year, there might be more strategic options worth considering.
Did you know? Current restrictions do not allow individuals to use a QCD to fund Donor Advised Funds, Private Foundations, or Supporting Organizations, but several popular charitable giving vehicles can be funded with a QCD, including:
Designated Funds: Designated Funds are a popular tool for individuals who provide consistent annual support to one or more organizations, as these funds are designed to distribute grants annually to the organization(s) the donor identifies when they create the fund. Funds can be structured to distribute charitable support to specified organizations over a term of years. Alternatively, the fund can be set up as permanent endowed fund, so grants are paid in perpetuity.
Scholarship Funds: Scholarship Funds provide financial aid to students based on eligibility criteria, award amount, and a selection process outlined in partnership with the donor.
- Field of Interest Funds: Field of Interest Funds provide ongoing support to causes that are close to the donor’s heart, such as housing, animal welfare, or the arts.
- Unrestricted Funds: Unrestricted Funds provide flexible support to the central Ohio community’s greatest opportunities and emerging needs.
- Charitable Gift Annuities (CGA): The SECURE Act 2.0 allowed IRA owners to direct a one-time distribution from their IRAs to a qualified charity to create a CGA to provide lifetime income to the IRA owner and/or their spouse. Upon the death of the annuitant(s), the remaining principal is retained by The Columbus Foundation to create a named fund that carries out the donor’s charitable intentions. Each individual IRA owner can donate up to $54,000 of their QCD to a CGA (2025 limit, indexed for inflation). However, each individual IRA owner can take advantage of this opportunity only once during their lifetime, and other restrictions apply.
The Columbus Foundation works with the donor—sometimes in conjunction with their advisors—to document their plans. Once that is complete, the donor simply needs to instruct their IRA custodian to transfer a specific amount directly to The Columbus Foundation and alert their CPA of the QCD come tax season. The gift amount is then excluded from income for federal tax purposes while still counting toward their RMD for that year. It’s really that simple.
We’re here to help. For more than 80 years, The Columbus Foundation has served as the vehicle through which thousands of people have expressed their ideals and optimism through philanthropic investment. Contact us if you are interested in learning more about how The Columbus Foundation can help you or your clients develop an impactful charitable plan.
About The Columbus Foundation
The Columbus Foundation serves thousands of individuals, families, and businesses that have created unique funds and planned gifts to make a difference in the lives of others through the most effective philanthropy possible. The Columbus Foundation is Your Trusted Philanthropic Advisor and is one of the top 10 largest community foundations in the country.