Key Takeaways
What is a Required Minimum Distribution (RMD), and when do retirees have to start taking it?
An RMD is the annual required withdrawal from a qualified retirement plan, generally starting by April 1 of the year after retirement or age 73 (whichever is later).
What is a Qualified Charitable Distribution (QCD), and why does it matter for high-income retirees?
A QCD is a direct IRA-to-charity transfer that can be excluded from gross income, helping offset the tax impact of RMDs.
Who qualifies for a QCD, and what rules must be followed to get the tax benefit?
You must be age 70+ and have the IRA trustee pay an eligible charity directly (not a donor-advised fund or supporting organization), and you can’t also deduct the same gift.
What is the 2026 QCD limit, and can spouses double the benefit?
In 2026, QCDs are capped at $111,000 per taxpayer, and eligible spouses can each use the limit (up to $222,000 total).
How can QCDs improve tax outcomes beyond charitable deductions?
By lowering income instead of relying on itemized deductions, QCDs can sidestep deduction limits and may reduce AGI for calculations like Medicare IRMAA.
Qualified Charitable Distribution (QCD) planning is an increasingly appealing option for individuals who must take distributions from IRAs and other qualified retirement plans. These distributions are commonly referred to as Required Minimum Distributions (RMDs). For eligible individuals with charitable intent, QCDs can provide meaningful tax advantages, but the rules are specific and the qualifications matter. Understanding the applicable limits, timing requirements, and transfer rules is essential to achieving the intended tax results.
Required Minimum Distributions (RMDs)
An RMD is the amount a taxpayer is required to distribute annually from a qualified retirement plan.
The required start date for such distributions is generally April 1st of the calendar year following the later of:
- The year of retirement, or
- The year the participant reaches age 73.
The required distribution is calculated using life expectancy and the prior year end account balance and can be significant for clients with large retirement accounts. These distributions are generally fully taxable if the account was funded with deductible (pre-tax) contributions. As a result, retirees with charitable goals may benefit from planning strategies that reduce the income tax impact of RMDs while also supporting their philanthropic objectives.
Qualified Charitable Distributions (QCDs)
For high-income individuals who are required to take IRA distributions, QCDs under Section 408(d)(8) can provide significant tax benefits when the rules are carefully followed. Eligibility and execution requirements are specific, and meeting each qualification is critical to ensuring the distribution is excluded from gross income.
Key requirements and limitations include:
- Age: An individual age 70 or older may exclude from gross income certain distributions from an individual retirement account (IRA) that are made directly to qualifying charitable organizations.
- Annual limit: For 2026, the total amount of QCDs is limited to $111,000 per taxpayer.
- Direct transfer requirement: The transfer must be made directly by the IRA trustee to the charity.
- Recipient restrictions: The QCD generally cannot be made to a supporting organization or a donor-advised fund.
- No double benefit: The distribution must otherwise qualify as a deductible charitable contribution (disregarding percentage limitations), though the taxpayer cannot claim a charitable deduction for the same gift.
If both spouses are in RMD mode and each has an eligible IRA:
- Each spouse can make a $111,000 QCD which is a potential combined reduction in gross income of $222,000.
Note: There is proposed legislation that would allow QCDs to donor-advised funds. This provision is not currently in effect.
Why QCDs Are Helpful
This strategy has always been especially helpful for clients who take the standard deduction (and therefore do not itemize), because it can deliver a tax benefit through an income reduction rather than through a charitable deduction. Now under OBBB, this planning approach can be even more valuable for clients who do itemize due to additional limitations on itemized deductions. For 2026, charitable deductions are subject to a 0.5% adjusted gross income (AGI) floor, and itemized deductions for high earners are effectively capped at a 35% tax benefit.
Additional Considerations
Because QCDs reduce income rather than relying on an itemized deduction, they bypass these deduction limits. They can also reduce AGI for other calculations including potentially lowering income for purposes of IRMAA (income-related monthly adjustment amounts for Medicare premiums).
For individuals who are already required to take IRA distributions and who have charitable intent, QCDs can be a powerful way to align giving with tax efficiency. Windham Brannon can support retirees in confirming eligibility and ensuring the transfer is made directly from the IRA to the charity, so the intended RMD and income tax results are achieved. For questions and additional guidance, please reach out to Marie Fahy or your Windham Brannon advisor.
