A Qualified Charitable Distribution (QCD) is a donation from a pre-tax IRA (Traditional or Rollover) after the RMD age that can count toward the account owner’s RMD. Being that it is a charitable donation, the funds given become tax-free.
Real-life Application: Person A has to take $10,000 out of their IRA as an RMD this year. They plan to be in the 22% federal tax bracket for the year, so they will have to pay $2,200 of federal tax (plus potential state tax) on this distribution. Instead, they split the amount among 4 different charities as QCDs and no longer recognize that income, so the full amount can be given charitably.
Pro Tip: If you are already donating to charity and you have to take RMDs, this can be a great way to minimize taxes for yourself and maximize donations to charity.