Make a Year-End Gift That Benefits You and Your Charity

A qualified charitable distribution (QCD) is a direct transfer from an IRA to a qualifying charity, available at age 70½ or older, with a 2026 annual limit of $111,000 per person.

What a QCD Actually Does for You

If you are 70½ or older, you have access to one of the most efficient planning tools in the tax code — and it has nothing to do with itemizing.

A Qualified Charitable Distribution (QCD) moves money directly from your IRA to a qualified charity. Because the funds never touch your hands, the distribution is excluded from your taxable income rather than deducted after the fact. That distinction matters more than most retirees realize. A charitable deduction only helps if you itemize and only reduces tax at your marginal rate. A QCD reduces your adjusted gross income — the number that drives your Medicare IRMAA surcharges, the taxable portion of your Social Security benefits, your net investment income tax exposure, and a long list of other thresholds.

For households already giving generously, a QCD is often the single highest-leverage charitable move available. It is also the cleanest way to satisfy a required minimum distribution you did not want to take.

The Mechanics: How a QCD Works

Three conditions define whether a distribution qualifies:

• Age. The IRA owner must be at least 70½ when the transaction occurs. Turning 70½ later in the year does not satisfy the requirement. A beneficiary of an inherited IRA can also make a QCD if they meet the age test.
• Source. A QCD may be made from an IRA, an inactive SEP or SIMPLE IRA, or a Roth IRA — though only pretax amounts qualify, which makes Roth funds impractical for this purpose.
• Delivery. The transfer must go directly from the IRA to the charity. A check payable to the charity but mailed to you will still qualify, as will a check written from a checkbook IRA. What does not qualify is receiving a distribution yourself and then writing a personal check to the charity—that is an ordinary withdrawal followed by a deduction, and it forfeits the entire advantage.

Both spouses can make QCDs when each spouse gives from their own IRA.

The 2026 Numbers

The annual exclusion is indexed for inflation and adjusts in $1,000 increments, so the figures have moved.

A married couple filing jointly, where each spouse is age-eligible and each owns an IRA, can exclude up to $222,000 in a single year.

Two limits deserve attention. First, the one-time election to fund a charitable gift annuity, charitable remainder unitrust, or charitable remainder annuity trust is capped at $55,000 and can only be used in one year of your lifetime — a planning decision worth making deliberately rather than in December. Second, any QCD above the annual exclusion is included in your income. You can deduct the excess as a charitable contribution on your return, but you can’t carry it over to a future year. There is no mulligan here.

Note also that a QCD to a charity where you have an outstanding pledge still qualifies and does not create a prohibited transaction—a useful point for anyone fulfilling a multi-year commitment.

QCDs and Your RMD: Order Matters

A QCD can satisfy your required minimum distribution, but it is not limited to the RMD amount, and the RMD is not limited to the QCD cap.

Sizing the two against each other is where the strategy gets interesting. If your RMD is $60,000 and you give $30,000 to charity, completing that QCD before you take any other distributions from the IRA lets you offset part of the RMD with money that would otherwise be taxable income. If your RMD exceeds $111,000, the amount above the QCD cap remains taxable to you.

One of the more commonly missed opportunities: QCDs are permitted before your first RMD year. Since the SECURE 2.0 Act moved the RMD starting age to 73, a donor between 70½ and 73 can make QCDs for several years with no distribution requirementat all —reducing taxable income during the exact window when many clients are doing Roth conversions or delaying Social Security.

That last point carries a real caveat. A QCD lowers your AGI, which can make a Roth conversion more expensive on a marginal basis or affect the analysis entirely. QCDs and conversions aren’t automatically complementary; you need to sequence them together, not evaluate them separately.

Reporting: What Changed and What Didn’t

The IRS introduced Code Y in Box 7 of Form 1099-R to identify QCDs, with custodians scheduled to begin using it. The IRS then announced that Code Y is optional for tax year 2025, and the 2026 instructions confirm it remains optional for 2026.

Practically, this means your 1099-R may not separate QCD amounts from other distributions. The full distribution still appears in Boxes 1 and 2a, and you remain responsible for reporting the QCD and excluding it from income on your return. The reporting rules themselves have not changed—only the visibility has.

Two consequences follow. You cannot claim a charitable deduction for the QCD amount, since it was never included in income. Because the custodian’s coding is unreliable, your records are the backstop. Keep the charity acknowledgment letter and the transfer confirmation for every QCD.

Mistakes That Cost Real Money

• Taking the distribution first. Receiving a check payable to you and then donating the funds converts a QCD into a taxable withdrawal. The order is not negotiable.
• Giving to a donor-advised fund or private foundation. Neither qualifies. If a DAF is central to your giving strategy, you can’t fund it directly with a QCD.
• Missing the December 31 deadline. You must complete the transfer by year-end. Custodians process slowly in the final weeks—this is not a task to start on December 20.
• Waiting on the age test. If you reach 70½ in November, you cannot make a QCD in September.
• Stacking the split-interest election without a plan. You get one, ever. Using it casually forecloses the option permanently.
• Forgetting your spouse. Two eligible spouses with two IRAs double the annual capacity. Couples who coordinate giving through a single IRA leave half the benefit unclaimed.

Where This Fits in a Broader Plan

A QCD is not a standalone tactic — it is one lever among several, and its value depends on what else is happening in your tax picture that year.

For clients with substantial IRA balances, the strategic question is rarely “should I give from the IRA?” but rather “which dollars should fund my giving, and in what order should I draw from my accounts?” Giving appreciated securities from a taxable account, giving from an IRA, and giving from cash each produce different results depending on your income, your bracket, and whether you are in a Roth conversion window.

The years between 70½ and 73 are often the most productive planning window a retiree will ever have — no RMDs forcing income, and QCD eligibility already open. Using that window well requires seeing charitable giving, Roth conversions, Social Security timing, and RMD planning as one integrated picture, not four separate conversations.

Here’s the FAQ section, formatted to drop straight into the post.

Frequently Asked Questions About QCDs

The 2026 annual QCD exclusion is $111,000 per person, up from $108,000 in 2025. A married couple filing jointly, where each spouse is age-eligible and each owns an IRA, can exclude up to $222,000 combined in a single year. Amounts above the annual exclusion are included in your income and cannot be carried over to a future tax year.

An IRA owner or an IRA beneficiary who is at least 70½ years old at the time of the transaction. Reaching age 70½ later in the same year does not satisfy the requirement — the age test applies to the date of the distribution, not the calendar year. Both spouses can make QCDs when each spouse gives from their own IRA.

Financial Success Doesn’t Happen by Chance.
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Contact one of our advisors at 940-464-4104, to discuss your qualified charitable distribution and year-end tax planning questions. You may also schedule a free virtual consultation on our website, RFGWealthAdvisory.com/virtualconsultation/

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