If you're a business owner nearing or over retirement age, you've likely encountered Required Minimum Distributions (RMDs)—and the tax bill that comes with them. But what if there were a way to fulfill those obligations while supporting a cause you care about—and reduce your taxable income in the process?
Qualified Charitable Distributions (QCDs) offer exactly that. At Nth Degree CPAs, we help business owners use tax-efficient giving strategies like QCDs to reduce liability while aligning finances with their values.
What Is a Qualified Charitable Distribution?
A Qualified Charitable Distribution is a direct transfer of funds from your IRA to a qualifying charitable organization. It’s available to individuals aged 70½ or older and can count toward your RMD—without counting toward your adjusted gross income (AGI).
That last part is important: Unlike regular IRA withdrawals, QCDs don’t increase your AGI, which means you could avoid moving into a higher tax bracket or losing other tax credits.
Why Small Business Owners Should Care
- Reduces Taxable Income Without Itemizing
Even if you take the standard deduction and don’t itemize, you can still benefit from QCDs—something not true for most other charitable contributions. - Fulfills RMDs Efficiently
QCDs satisfy all or part of your annual RMD. If you’re over 73 and don’t need the cash, this is a smarter way to handle distributions. - Supports the Causes That Matter to You
Many business owners already donate to causes they care about. A QCD lets you do it with pre-tax dollars, maximizing the impact of your giving.
How to Use QCDs Strategically
- Eligible Accounts: Only traditional IRAs qualify—not 401(k)s or other retirement accounts.
- Direct Transfers Only: The funds must be transferred directly from your IRA custodian to the charity. If you withdraw the funds yourself first, it won’t qualify.
- Annual Limit: You can donate up to $100,000 per year via QCDs, or $200,000 for married couples with separate IRAs.
- Qualified Charities Only: The recipient must be a 501(c)(3) public charity. Private foundations and donor-advised funds do not qualify.
- No Quid Pro Quo: You can’t receive goods or services in exchange for your donation—no event tickets, meals, or other perks.
Don’t Leave Tax Strategy to Chance
QCDs aren’t just about philanthropy—they’re a powerful tax planning tool. But timing, documentation, and IRS rules matter
Working with a CPA who understands your business and retirement goals ensures that your QCDs are executed properly and integrated into a broader financial strategy. At Nth Degree CPAs, we specialize in helping business owners make strategic financial decisions that create long-term impact.
If you’re a small business owner aged 70½ or older, Qualified Charitable Distributions could offer a smarter way to give—reducing your tax burden while supporting the causes that matter to you. It’s a rare win-win in the tax code, but only if you use it correctly.
Interested in using QCDs to reduce taxes and maximize your giving strategy?
Schedule a consultation with Nth Degree CPAs today and get a custom plan tailored to your retirement and philanthropic goals.
