Would saving taxes in an efficient way be worth investigating? If your answer is yes, you may want to consider a QCD for your RMD. If you are charitably inclined and would like to reduce your taxes, please read on.
First, a quick refresher on Required Minimum Distributions (RMD). At age 73 (age 70½ if reached before January 1, 2020 and age 72 if reached before January 1, 2023) the IRS requires you to begin withdrawing funds from your IRA, 401(k), 403(b), and other defined contribution plans in mandated annual increments known as Required Minimum Distributions. These distributions are considered taxable income in the year of the distribution.
How QCD’s Can Work in Your Favor
If making regular charitable contributions is important to you, a Qualified Charitable Distribution (QCD) may be a suitable IRA RMD tax-relief strategy. Starting at age 70½, an individual can direct IRA distributions of up to $111,000 per year (2026 limit) directly to a qualified 501(c)3 charity of their choice. If married, each spouse can give up to $111,000 from their own IRA annually. Please note that a QCD is only allowed from an IRA, not a 401(k) or 403(b) Plan.
The QCD satisfies the RMD rules. Since the money was sent directly to a qualified charity, you are not required to report the QCD amount as taxable income. The QCD rule permits you to use the donation to offset up to $111,000 of your 2026 taxable RMD which lowers your adjusted gross income (AGI).
Reducing your AGI could result in a lower marginal tax bracket, reduced Medicare premium surcharges, etc. If you regularly support charities, you may find that the QCD is truly a win-win. Charities that I support are reporting that the QCD is becoming quite popular due to its simplicity and benefits.
Qualified Charitable Distribution (QCD) details:
- You must be age 70½ or older.
- The charity must be a qualified 501(c)3.
- Charities that do not qualify include donor-advised funds, supporting organizations (organizations that give to other public charities) and private foundations.
- The distribution must be paid directly to the charity by your IRA custodian.
- QCDs are allowed ONLY from pre-tax IRA’s, Inherited IRA’s and SEP/SIMPLE (if inactive).
- QCD’s are NOT allowed from 401(k) or 403(b) Plans
- You can make multiple QCDs to multiple charities.
- The first dollar out of your IRA is considered to be the RMD. If you take your full RMD early in the year and later wish to do a QCD, you cannot retroactively deem the first distribution to be a QCD. Therefore, plan for QCDs early in the year.
- The Charity MUST supply you with a “contemporaneous written acknowledgement” letter. This is your proof of donation for the IRS.
QCD changes with “SECURE ACT 2.0” signed into law December 29, 2022
- Taxpayers may now make a one-time $55,000 QCD transfer (2026 limit) to a charitable remainder trust (CRT) or other split-interest gift such as a charitable gift annuity (CGA). These are the legacy IRA provisions. Note that the law effectively mandates that the CGA or CRT be created solely for the purpose of receiving a QCD because the new statute requires that the vehicle contain only IRA assets.
- Beginning in 2024 the annual per-taxpayer $100,000 QCD cap is slated to be indexed for inflation. The 2024 cap was $105,000. The 2025 cap was $108,000. For tax year 2026, the per-taxpayer QCD cap is now $111,000.
If you would like additional information on QCD’s or have questions, please call our office.