Qualified Charitable Distributions (QCDs)

Introduction

Qualified Charitable Distributions (QCDs) let you support charities while managing taxes. For people with required minimum distributions (RMDs) from IRAs, QCDs can reduce taxable income and support causes you care about. This guide explains what QCDs are, who can use them, and how they fit into your tax strategy.

Under the One Big Beautiful Bill Act (OBBBA), 2026 brings new limits on charitable deductions. Traditional donations now face a 0.5% AGI floor and a 35% cap for top earners. QCDs avoid these limits by excluding amounts from income entirely, making them more attractive than ever.

Important 2026 Tax Changes

Starting in 2026, charitable deduction rules tighten:

• Itemizers: Only amounts above 0.5% of AGI are deductible (e.g., AGI $300,000 → only donations above $1,500 count)
• Top bracket (37%): Deduction benefit capped at 35%
• Non-itemizers: Can deduct up to $1,000–$2,000 in cash donations

QCDs bypass all of these. They can reduce taxable income by up to $111,000 per person ($222,000 for couples) with no AGI floor or cap.

What Is a Qualified Charitable Distribution?

A QCD is a direct transfer from an IRA to a qualified charity. Unlike other charitable donations, QCDs do not require itemizing. The amount is excluded from taxable income, which helps standard deduction filers. Example: A retiree with a $20,000 RMD who donates $10,000 via QCD reports only $10,000 as taxable income.

Eligibility Requirements

Age and Account Type

You must be at least 70½ when the distribution occurs. QCDs apply only to traditional IRAs. 401(k)s, 403(b)s, and Roth IRAs are generally not eligible unless rolled into a traditional IRA first. If you have a 401(k) and want to use it for a QCD, roll it into a traditional IRA and allow time for the transfer—rollovers can take weeks.

Qualified Charities

The recipient must be a 501(c)(3) public charity. Donations to private foundations, donor-advised funds, or supporting organizations do not qualify. A local food bank or national health charity qualifies; a private family foundation does not.

Tax Benefits of QCDs

Reduction in Taxable Income

QCDs are excluded from AGI. Unlike regular RMDs, which are taxable, QCD amounts never show up as income. Example: A $50,000 RMD with a $15,000 QCD leaves only $35,000 taxable.

Fulfillment of RMDs

For those 73 and older, QCDs can satisfy RMD obligations. A $10,000 RMD donated via QCD satisfies the requirement without adding to taxable income.

Why QCDs Are Even More Valuable in 2026

OBBBA’s 2026 rules make QCDs more attractive. Regular charitable deductions now face a 0.5% AGI floor and a 35% cap for top earners. QCDs avoid both because they are an above-the-line exclusion, not an itemized deduction. They work whether you itemize or take the standard deduction.

Limitations and Considerations

Annual Limits

In 2026, the limit is $111,000 per person. Married couples filing jointly can each contribute $111,000 from their own IRAs, for up to $222,000 total.

Ineligible Contributions

Donor-advised funds, private foundations, and non-charitable groups do not qualify. A donation to a DAF at a brokerage, for example, is not a QCD.

Additional Benefits

Lower AGI from QCDs can reduce the taxability of Social Security benefits and Medicare Part B premiums. If AGI drops below certain thresholds, you may pay less for Medicare.

Special One-Time QCD Option

Beyond the $111,000 annual limit, SECURE Act 2.0 allows a one-time QCD of up to $55,000 in 2026 to fund a charitable remainder trust (CRT) or purchase a charitable gift annuity (CGA). This supports advanced charitable planning while keeping QCD tax benefits.

Step-by-Step Guide to Making a QCD

1. Confirm eligibility. You must be 70½ and hold a traditional IRA. If you turn 70½ in June, you can start QCDs from that date.
2. Choose a qualified charity. Verify the organization is a 501(c)(3) public charity. National charities qualify; political groups do not.
3. Coordinate with your IRA custodian. Tell the custodian you want a QCD, specify the amount and charity, and ensure the check goes directly to the charity—never to you.
4. Obtain documentation. Get a receipt from the charity confirming the donation and that you received no goods or services in return.

Common Mistakes to Avoid

• Wrong account: Only traditional IRAs qualify. A QCD from a 401(k) is disqualified—roll to an IRA first.
• Age requirement: You must be 70½ at the time of the distribution. A distribution at age 70 before your half-birthday does not qualify.
• Charity status: Verify the charity is qualified. A local nonprofit might not meet IRS requirements.
• Timing: Taking your RMD before the QCD means the donation cannot offset that taxable income. Plan the order of distributions.
• Taking the money first: Never withdraw to your bank account and then donate. The transfer must go directly from the IRA to the charity. Otherwise it is taxable income and only a limited charitable deduction applies.

How Valor Tax Relief Can Help

QCDs are one piece of a larger tax picture. Many people exploring QCDs also face high tax bills, IRS notices, back taxes, or RMD challenges. A broader tax relief strategy may be needed.

Valor Tax Relief helps resolve IRS and state tax issues—back taxes, penalties, interest, liens, levies, and wage garnishments. We review your situation and identify options such as installment agreements, offers in compromise, and penalty abatement. For retirees managing RMDs and charitable giving, professional guidance can align tax-saving strategies with overall goals.

Frequently Asked Questions