.png)
If you're over 70½ and still writing personal checks to your favorite charities, you may be missing one of the most powerful — and most overlooked — tax strategies in retirement.
It's called a Qualified Charitable Distribution, or QCD. And for retirees who give regularly to charity, it can save thousands of dollars in taxes every year while simultaneously satisfying your Required Minimum Distribution (RMD) obligation.
Here's everything you need to know about how QCDs work, why they've become even more valuable under 2026 tax law, and how to use them correctly.
Before understanding QCDs, it helps to understand the problem they solve.
Once you reach age 73, the IRS requires you to take Required Minimum Distributions — or RMDs — from your Traditional IRA every year. The amount is calculated based on your account balance and life expectancy, and it increases over time as your balance grows.
The issue isn't that you're forced to take money out. For many retirees with large IRAs, the issue is what those mandatory distributions do to the rest of their financial picture.
Every dollar of RMD income is added to your adjusted gross income (AGI) for the year. And a higher AGI creates a cascade of consequences that go well beyond your tax bracket:
More of your Social Security becomes taxable. Up to 85% of Social Security benefits can be subject to income tax, and the threshold is based on your combined income — which includes your RMD.
Medicare premiums can spike. The Income-Related Monthly Adjustment Amount (IRMAA) is a surcharge added to Medicare Part B and Part D premiums for higher-income beneficiaries. In 2026, a single retiree with income above $106,000 begins paying surcharges that can add thousands to annual healthcare costs. Your RMD directly influences this calculation.
Phaseouts reduce other benefits. Higher AGI can reduce or eliminate eligibility for various deductions, credits, and tax benefits that would otherwise be available.
This is why charitable giving and tax planning converge so powerfully in retirement. If you're already planning to give, there's a better way to do it than writing a check from your bank account after taxes.
A Qualified Charitable Distribution is a direct transfer of funds from your IRA to a qualified charity. The money goes directly from your IRA custodian — Schwab, Fidelity, Vanguard, or wherever your IRA is held — to the charitable organization, without ever passing through your hands.
That direct transfer is the key detail. It's what separates a QCD from a regular IRA withdrawal followed by a personal donation — and it's the reason the tax treatment is fundamentally different.
The basic rules:
Which accounts are eligible?
The tax benefit of a QCD is different from — and often better than — a standard charitable deduction. Here's why:
When you take a normal IRA withdrawal and then donate the money to charity, you still have to report the full distribution as income on your tax return. You might get a deduction for the donation — but only if you itemize, and even then, the new 2026 rules under the One Big Beautiful Bill Act limit the deductibility of charitable contributions in ways that reduce the benefit for many retirees.
Specifically:
A QCD bypasses all of this entirely.
Because the distribution goes directly to charity, the QCD amount is completely excluded from your taxable income. It never shows up as income on your return in the first place. This is an "above-the-line" exclusion — not a deduction — which means it reduces your AGI regardless of whether you itemize or take the standard deduction.
The practical difference is significant. Consider a retiree in 2026 with a $100,000 RMD who wants to donate $50,000 to charity. If they take the full RMD as income and then donate separately, only the amount exceeding 0.5% of their AGI is deductible — and the tax benefit is capped. But if they route $50,000 directly to charity via a QCD, that amount is excluded from income entirely. The tax savings are meaningfully higher, Medicare premiums are lower, and Social Security taxation is reduced.
1. Satisfying Your RMD Without Adding to Your Tax Bill
A properly executed QCD counts toward your Required Minimum Distribution for the year. This means you can meet your legal obligation to take money out of your IRA while directing those dollars to causes you care about — all without adding a single dollar to your taxable income.
2. Lowering Your Medicare Premiums
IRMAA surcharges are based on your income from two years prior. A QCD keeps your AGI lower today, which can reduce your Medicare premiums in future years. For retirees who are near an IRMAA threshold, a well-timed QCD can save thousands of dollars annually in premium surcharges — a benefit that doesn't show up on the tax return at all.
3. Reducing Your Taxable Estate Over Time
Every dollar that leaves your IRA through a QCD reduces the account balance that will eventually be subject to income taxes when inherited. Under current rules, most non-spouse beneficiaries must empty inherited IRAs within 10 years — and every dollar distributed is taxed as ordinary income. Reducing your IRA balance strategically through QCDs over time can meaningfully lower the tax burden your heirs will face.
Eligible charities: Most 501(c)(3) public charities qualify — churches, food banks, universities, hospitals, community foundations, and similar organizations. You can verify whether an organization qualifies using the IRS Tax Exempt Organization Search tool at irs.gov.
What does NOT qualify:
The concept is simple. The execution is where mistakes usually happen — and mistakes can cost you the tax benefit entirely.
The transfer must be direct. If the funds touch your bank account first, the IRS treats it as a regular taxable distribution. The check must be made payable to the charity, not to you.
The deadline is December 31. A QCD should be completed in the same calendar year you want it to count. December is also when custodians are busiest, so best to start the process in October or early November to avoid the year-end rush.
The "first dollars out" rule. Once you're subject to RMDs, the IRS treats the first money out of your IRA each year as satisfying your RMD. This means if you take a regular withdrawal in January and then execute a QCD in November, the QCD may not count toward your RMD — the regular withdrawal already did. Coordinate the order of your distributions carefully.
Custodian processing time. Your custodian may need specific forms, extra lead time, or may mail a check to the charity that you forward. Know your custodian's process before you start and allow at least four to six weeks of lead time.
Reporting on your tax return. Your custodian will issue a Form 1099-R showing the distribution — but it may not automatically identify it as a QCD. Beginning with the 2025 tax year, the IRS introduced a new "Code Y" on Form 1099-R specifically for QCDs, though many custodians are still transitioning to this. Work with your CPA to make sure the QCD is properly noted on your return so the amount is excluded from taxable income.
Keep your documentation. You'll need a written acknowledgment from the charity confirming the gift and stating whether any goods or services were received in exchange. Keep this along with your IRA custodian statement showing the distribution.
In addition to annual QCDs, there is a one-time option that many retirees aren't aware of.
Under current rules, you can use a single QCD of up to $55,000 (the 2026 limit) to fund a Charitable Remainder Trust (CRT) or Charitable Gift Annuity (CGA). These are split-interest charitable vehicles that allow you to support a charity while receiving an income stream back for life or a specified term.
This one-time election is separate from the annual $111,000 QCD limit and can be used in addition to regular annual QCDs. It's a sophisticated strategy that combines charitable giving, retirement income, and tax planning — and it's worth discussing with your advisor and estate planning attorney if you have a large IRA and meaningful charitable goals.
QCDs are powerful, but they're not the right tool for every situation.
If you prefer donor-advised funds: Many retirees use DAFs as their primary giving vehicle because they like the flexibility of contributing now and directing grants later. Since QCDs can't fund DAFs, you'll need a different strategy for those contributions.
If Roth conversions are a priority: A QCD removes dollars from your IRA tax-free, but so does a Roth conversion — with a different outcome. If your primary goal is building tax-free assets for yourself (rather than giving to charity), Roth conversions may take precedence. The right balance between QCDs and Roth conversions is one of the most important planning conversations for retirees with large Traditional IRAs.
If your tax savings are minimal: For retirees in very low brackets, the incremental benefit of a QCD over a standard donation may be modest. In these cases, the giving decision may matter more than the tax optimization.
If you need the IRA assets for spending: A QCD permanently reduces your IRA balance. If you're counting on those assets for future living expenses, healthcare costs, or liquidity, preserving the account may take priority over charitable giving.
Can I make QCDs from more than one IRA in the same year? Yes. You can split QCDs across multiple IRAs, as long as the combined total across all accounts stays within the $111,000 annual limit.
What if my QCD is larger than my RMD? You can give more than your RMD amount — up to $111,000 — and the full amount is still excluded from income. However, the excess does not carry forward to satisfy next year's RMD.
Can my spouse and I both make QCDs? Yes, as long as each spouse is at least 70½ and makes the QCD from their own IRA. Each spouse has a separate $111,000 annual limit, for a combined household limit of $222,000.
Can I use a QCD to satisfy an RMD I haven't taken yet this year? Yes — in fact, this is one of the primary use cases. Just remember the "first dollars out" rule: if you've already taken a regular distribution earlier in the year, coordinate with your advisor to ensure the QCD is still counted toward your RMD.
I already donated to charity this year from my bank account. Can I convert that to a QCD? No. A QCD must be executed as a direct transfer from the IRA to the charity. You cannot retroactively designate a personal donation as a QCD.
A QCD is never just a transaction. Done well, it touches your tax plan, your retirement income strategy, your Medicare cost structure, and your legacy goals — all at once.
At Arcadia, we help clients think through QCDs as part of a coordinated year-round planning process, not a last-minute December decision. That means:
If you'd like to explore how QCDs could fit into your retirement and tax plan, we'd welcome the conversation.
None of the information provided herein is intended as investment, tax, accounting, or legal advice. Your use of this information is at your sole risk. Consult with qualified professionals regarding your specific situation.
Grant Webster, CFP®, TPCP®
Founder, Wealth Advisor