Qualified charitable distributions from traditional IRAs by those ages 70½ and older are more valuable thanks to significant changes to charitable contribution deductions made by the One Big Beautiful Bill Act.
It is important to take two steps now.
First, if you have not maximized your QCD benefits for 2026, do so before December 31.
Second, carefully plan how to use QCDs for your charitable giving in 2027.
Here is a summary of the OBBB changes in charitable giving.
The doubling of the standard deduction from the 2017 tax law was made permanent and indexed for inflation. Since charitable contributions can be deducted only as itemized expenses, few people take itemized expense deductions now because of higher standard deduction.
That means few people receive additional tax benefits from charitable giving.
To partly offset that, the OBBB created a new charitable contribution deduction that can be taken without itemizing expenses. The maximum deduction is $1,000 for individual taxpayers or $2,000 for married taxpayers filing jointly.
An additional change is the new floor on charitable contributions for those who itemize expenses. Charitable contributions up to 0.5% of adjusted gross income are not deductible starting in 2026. Only charitable contributions above that amount will be deductible.
Also, taxpayers in the top 37% income tax bracket don’t receive the full benefit of their deductions. They receive only the benefits of those in the 35% tax bracket.
The QCD has been one of the most powerful tax and charitable-giving tools. It probably is the best way for anyone over age 70½ to make charitable contributions, with the possible exception of donating highly-appreciated investments held in taxable accounts.
A QCD is a much better way to donate than writing a check.
QCDs are an essential tool for any charitably-inclined taxpayer who faces required minimum distributions (RMDs).
A QCD is a special way of making charitable contributions from a traditional IRA.
Suppose you want to use a traditional IRA to make a charitable gift. When the distribution is not a QCD, the distribution is included in your gross income and taxed.
It’s a different story when the gift is a QCD.
A QCD is not included in gross income. Taking a QCD instead of a regular IRA distributions reduces income taxes as well as the Stealth Taxes, such as the Medicare premium surtax also known as IRMAA.
The tradeoff is that you don’t receive a charitable contribution deduction.
Another advantage of a QCD is, if you must take an RMD from the traditional IRA that year, the QCD counts toward the RMD. You can satisfy all or part of the RMD without having to include it in gross income to the extent you have QCDs.
With QCDs, you take all or part of the year’s RMD tax free.
QCDs are a good idea even for those who don’t have to take RMDs yet. They benefit charity with the QCD and distribute money from the IRA tax free. That reduces the value of the traditional IRA, which reduces future RMDs.
Non-IRA money that would have been donated to charity is available to pay other expenses.
QCDs are such a good deal that, of course, Congress requires you to jump through certain hoops for a distribution qualify as a QCD.
The first rule is the traditional IRA owner must be at least age 70½ on the date of the transfer from the IRA to the charity.
The charitable contribution must be made directly from the traditional IRA to a charity.
The IRA owner can instruct the IRA custodian to transfer the money to a named charity or charities. Or the IRA custodian can give the owner a check made payable to the charity that the owner delivers to the charity.
Some custodians give checkbooks to IRA owners. The owners take IRA distributions by writing checks against their IRAs. A QCD can be made by making such a check payable to a charity.
A transaction is not a QCD when you take a distribution from a traditional IRA and separately contribute the same amount to charity during the year. The money or property must go directly from the IRA to charity to be a QCD.
There’s a potential timing problem when writing a check against the IRA. In its annual report to the IRS, the IRA custodian will report the check as a distribution in the year the check cleared. If you write a check in late December and it doesn’t clear until early January, the custodian could report it as a distribution made in January.
If the QCD was intended to be part of your RMD the previous year, you’ll miss taking all or part of your RMD by December 31 and could be liable for penalties.
QCDs can exceed your RMD for the year. If your RMD is $10,000, and you want to give $20,000 to charity during year, the entire $20,000 contribution can be made from the IRA as a QCD. But only $10,000 will count as an RMD. There’s no carryover of the additional QCD to satisfy next year’s RMD.
It’s important to plan QCDs and RMDs early in the year to avoid potential traps in the tax code for those who aren’t careful.
When you are subject to RMDs, the first distributions from traditional IRAs for the year are considered RMDs and included in gross income.
Some people take distributions from their IRAs early in the year. Later, they learn about QCDs or decide they want to make QCDs.
They cannot reverse those earlier RMDs (except in limited cases within 60 days of a distribution) or turn them into QCDs.
The distributions early in the year are RMDs and must be included in gross income. If the year’s RMDs have not been fully satisfied, QCDs can be taken to satisfy the rest of the year’s RMD.
Making QCDs early in the year also is a good idea when you’re planning to convert all or part of a traditional IRA to a Roth IRA and are subject to RMDs.
The rule is that when you convert IRA assets, you first must take any RMD for the year. If you take the RMD as a regular distribution, it’s included in gross income. Then, the converted amount also is included in gross income. The RMD effectively adds to the tax cost of the conversion, because you take the RMD first.
But when you take the RMD as a QCD, it isn’t included in gross income. The QCD effectively reduces the cost of the conversion, plus you benefit charity.
There’s an annual limit per taxpayer (not per IRA) on QCDs that now is adjusted annually for inflation. The maximum QCD is $115,000 in 2026.
In a married couple, each spouse has a separate limit. They may not share the limits or split the QCDs.
If one spouse wants to make more than $115,000 of charitable donations in 2026, he or she can’t use part of the other spouse’s QCD limit. If the couple wants to have $230,000 of QCDs in 2026, each must donate $115,000 from his or her traditional IRA.
Even if your RMD for the year exceeds $115,000, no more than $115,000 of distributions can be QCDs.
Charitable contributions from a traditional IRA that exceed the year’s QCD limit will be non-QCD distributions that are taxable as described earlier.
Unused portions of the annual limit don’t carry forward to future years. The annual ceiling is a use-it-or-lose-it limit.
Only pre-tax money can be used to make a QCD. That means any nondeductible contributions (after-tax money) in a traditional IRA cannot be used to make QCDs. You can instruct the custodian to use only pre-tax money to make QCDs and leave after-tax money in the IRA.
In general, QCDs can be made only from traditional IRAs. They can be made from simplified employee pensions (SEPs) and SIMPLE IRAs only when the plan has not received an employer contribution in the plan year that ends with or during the calendar year in which the charitable contribution is to be made. In other words, the SEP or SIMPLE IRA must be inactive.
Other retirement plans, including 401(k)s, don’t qualify for QCDs.
Inherited IRAs may be used to make QCDs.
A distribution is not a QCD if the IRA owner receives any benefit from the donation. Any small gift or reward from the charity makes the entire contribution ineligible for a QCD.
Also, you must follow the rules for proving charitable contributions. You need an acknowledgement in writing from the charity regarding the amount and date of the contribution. For large donations, additional proof might be required.
Only donations to public charities qualify. Contributions to private foundations, donor-advised funds, and tax-exempt groups other than public charities aren’t QCDs.
The SECURE Act permits contributions to traditional IRAs after age 70½. It also prohibits an individual from combining a QCD with deductible IRA contributions made after age 70½.
