If you’re at least age 70½ and own an IRA, there’s a powerful but often overlooked tax strategy worth knowing about: the Qualified Charitable Distribution (QCD). For charitably inclined retirees, a QCD can be a smart way to give while also reducing taxable income.
A QCD allows individuals aged 70½ or older to transfer funds directly from a traditional IRA to a qualified charity. These distributions are excluded from your taxable income, unlike regular withdrawals from a traditional IRA.
This becomes especially valuable as you approach age 73 (the age when Required Minimum Distributions, or RMDs, typically begin). While QCDs can be made before RMDs start, they become more strategic afterward because they can count toward satisfying your RMD—without increasing your adjusted gross income (AGI).
Lower AGI can potentially reduce the taxation of Social Security benefits, minimize Medicare premium surcharges, and preserve eligibility for certain deductions or credits.
Many clients like to start their QCDs as early as possible to lower their IRA balances in a tax-efficient way, thus helping manage the size of future RMDs.
A Simple Example
While you can give to any eligible charity, the most common scenario we see is individuals giving regularly to their church. Up to this point, they've given out of their income, but now they can give from funds that have never been subject to federal income tax (and never will be, if you follow the rules!).
Consider a married couple who give $500 per month ($6,000 per year) to their church. Late last year, the wife turned 70½, making her eligible to use a QCD for all of 2026.
Instead of writing monthly checks from their bank account, she can direct $6,000 from her IRA to be sent directly to the church as a Qualified Charitable Distribution. The result? The couple still fulfills their annual giving goal, but that $6,000 is excluded from their taxable income.
If you don't want to send a check once a year, we can set it to go out monthly. If you have more than one charity you support, that's fine as well. For 2026, the IRS limit for this strategy is $111,000, or $222,000 for couples married filing jointly (each person must have their own IRA).
For clients who take the standard deduction, this strategy effectively gives them a bigger tax benefit than they might otherwise receive.1 And once Required Minimum Distributions begin, continuing this approach can help satisfy those distributions in a more tax-efficient way.
Key Rules to Keep in Mind
You must be at least 70½ at the time of the distribution.
The funds must go directly from your IRA custodian to the charity.
The annual QCD limit is $111,000 per person (subject to future inflation adjustments).
QCDs can only be made from IRAs—not from 401(k)s or other employer-sponsored plans (unless rolled into an IRA first).
In short, if you’re at least age 70½ and charitably inclined, QCDs can be a highly efficient way to support causes you care about while managing your tax exposure.
For those who aren't yet old enough, but already give to charity, please keep this in mind as a future planning opportunity.
As always, please consult with your tax professional, as our firm does not provide tax advice.
Notes:
1) Starting in 2026, a $1,000 per person income tax deduction for charitable contributions ($2,000 for married couples filing jointly) is available for individuals taking the standard deduction.
2) For more information, see IRS Publication 2025-B.
Source: irs.gov