How to Use Your IRA to Donate to Charity (And Potentially Lower Your Tax Bill)

So, you’ve spent your career making contributions to tax deferred retirement accounts—401(k), 403(b), Traditional, SEP, or Simple IRAs. If you are 72 and older, you might be anticipating the end of the tax year with anxiety, as you are left wondering how your taxable income might be negatively affected during retirement. 

Although required minimum distributions (RMDs) are required after 70 ½ or 72 (depending on your age), charitable gifts are a great way to help others, while potentially reducing your taxable income.

Despite the RMD requirement, you might find yourself in a comfortable living situation in which you do not need to make the annual withdrawal, and consequently increasing your gross annual income. Unfortunately, if you do not make the RMD, you will be hit with a tax equivalent to 50% of the amount that was meant to be withdrawn. The solution? Charitable donations.

In this article, we will discuss how making charitable donations from your IRA account can serve your altruistic desires, while also potentially helping to lower your tax bill.

Required Minimum Distributions (RMDs)

After you reach the age of 72, you are required to make annual withdrawals from your Traditional IRA (Roth IRAs are not subject to this requirement). These withdrawals are normally taxed as income. It is possible you might find that you do not need to make a withdrawal on any given year, but you wish to avoid the tax penalty of 50% the total amount—in short, you’ve found yourself in a pickle. 

By making an RMD, you are effectively increasing your income—for better or for worse. A consequence of this is potentially moving yourself to a higher tax bracket when it may not be necessary for your lifestyle. This can have a detrimental effect on one’s financial situation, potentially causing a domino effect of sorts, as the unexpected increase in income may impact other anticipated benefits. 

Although this might sound intimidating, Southwestern Investment Group is here to help you avoid these unpleasant surprises in your finances by guiding you with a plan and helping empower you to take charge of your retirement.

Qualified Charitable Distributions—The Solution

Qualified Charitable Distributions (QCDs) are distributions made directly to a tax-exempt nonprofit or charitable organization directly from a Traditional IRA at age 70 ½ or later. QCDs can still be made at 70 ½, even though the RMD required age is 72. QCDs must be made directly to a qualified charity, up to $100,000 per person annually. Congress made the QCD rule permanent in 2015, providing a solution to this previously mentioned pickle. QCDs allow Traditional IRA owners to exclude their RMD from their adjusted gross income; allowing them to remain in a lower tax bracket and may consequently reduce or eliminate the taxation of social security. QCDs also allow individuals to remain eligible for deductions and credits (excluding an additional itemized charitable deduction for the same gift) that might have otherwise been lost.


The IRS has established rules to ensure that QCDs are made properly, this is to help protect you and guide you throughout the process of managing your IRA account to your advantage. It’s important to note that tax breaks on charitable donations can not be combined with the tax break on retirement savings.

Since there are understandably many potential missteps with managing your retirement, it can be greatly helpful for you to consult with a trusted financial advisor. We are here to help.

Southwestern Investment Group provides financial guidance that helps empower you to make financial decisions with confidence. Contact us today to learn more about how to manage your retirement accounts.

alor1348 jeff
Jeffrey T. Dobyns


President, SageSpring | Financial Advisor, RJFS 

Jeffrey T. Dobyns

President, SageSpring | Financial Advisor, RJFS

Beyond crunching numbers and investment strategies, at SageSpring, we’re about building relationships. When you encounter Founder & President of SageSpring, Jeff Dobyns, it’s easy to understand why this is at the very heart of who we are as a firm. You won’t find stuffy formalities with Jeff; instead, you can expect to find him sharing a warm smile, communicating a compelling vision, or patiently untangling life’s complex challenges with clients. He believes in truly getting to know clients, understanding their aspirations and priorities, and navigating their financial plans with a tailored, comprehensive approach. Our team members have often been caught taking notes on Jeff’s effortless relationship skills from a distance, and we admire them for striving to learn from one of the best. 

Jeff’s financial expertise and wisdom are the perfect match to his innate people skills. Jeff holds the prestigious CERTIFIED FINANCIAL PLANNERTM certification, Chartered Life Underwriter (CLU®), and Chartered Financial Consultant (ChLU®) designations, and has held executive positions with financial planning firms for more than two decades. 

His dedication extends beyond the office to the boardroom and the local community, where Jeff is passionate about giving back. He serves as Chairman of the Board of Men of Valor, a prison ministry and mentoring program. Jeff also serves on the board of Send Musicians to Prison, which shares hope, healing and restoration with the imprisoned through musicians & artists. Jeff actively supports other initiatives in the community by sitting on the board of The Signatry of Middle Tennessee and the Halftime Institute of Nashville. 

Witnessing his four children, Gracyn, Hunter, Tanner, and Logan, excel on the field is almost just as rewarding, if not more, than celebrating the victories of seeing his clients overcome obstacles and build wealth. Spending weekends boating on the lake, hiking mountain trails, and fishing with his family are the moments Jeff cherishes most. It’s this grounded perspective that reveals the true meaning of wealth for Jeff: not just numbers on a page, but the freedom to create experiences that enrich your life and the lives of those you love. When you choose the Dobyns McMillin Wealth Team, you choose more than financial expertise. You choose a partner who champions your dreams, celebrates your victories, and walks besides you on the path to achieving your unique goals.

**Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER TM, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.