Charitable Giving in Retirement: The QCD Move That Beats Cash Donations

I had a couple at a workshop last spring tell me about their charitable giving. They were both 73, both retired, both had been writing personal checks to their parish, the local food bank, the Standish Memorial Hospital fund, and a couple of national charities — totaling about $12,000 a year. They were itemizing on Schedule A. They were proud of the giving — and they should be — but their CPA had never told them about the QCD. After we ran through it at the lab portion the next week, they realized they'd been overpaying federal tax by about $1,500 a year for the previous three years just by writing checks instead of using the IRA-to-charity path. Three years times $1,500 is $4,500 they didn't need to pay. Right? The fix was twenty minutes of paperwork. Let me walk you through what they learned.

What a QCD is

A Qualified Charitable Distribution — QCD — is a transfer made directly from your IRA to a qualified charity. The IRA custodian sends the check straight to the charity. You never receive the money personally. The transaction has three magic properties:

That third property is the one most retirees miss. With the higher standard deductions and the OBBBA-extended structure of the 2025 tax law, most retirees take the standard deduction and lose any federal tax benefit from charitable giving. The QCD bypasses that problem entirely. It's the only widely-available way for non-itemizing retirees to get a federal tax benefit from charitable giving.

The rules and limits

• Eligibility: you must be at least 70½ on the date of the transfer. (Note: the RMD age moved from 70½ to 72 to 73, but the QCD age stayed at 70½.)
• Source account: Must come from a Traditional IRA, Inherited IRA (where the inheritor is 70½+), or Roth IRA. Cannot come from a 401(k), 403(b), 457, or other employer plan. If you have IRA money to give, use the IRA. If your money is all in a 401(k), roll some to an IRA first.
• 2026 limit: approximately $108,000 per individual per year (the limit indexes annually for inflation). For a married couple, each spouse can do their own $108,000 — so up to $216,000 in QCDs per year combined if each has their own IRA.
• Qualifying charities: 501(c)(3) public charities. Donor-advised funds and private foundations do not qualify. Most religious organizations, hospitals, schools, food banks, and named charities qualify.
• Mechanics: The IRA custodian must send the check directly to the charity. Receipt of the check by you and forwarding to the charity does not qualify as a QCD.

The math compared to writing a check

Imagine a retired couple, both 73, taking $40,000 of RMDs from their IRAs and giving $10,000 to charity from their bank account. They take the standard deduction. Their federal tax picture:

Without QCD (writing checks):

• RMD of $40,000 hits AGI
• $10,000 charitable gift from bank account doesn't help — they're taking standard deduction
• Net taxable: $40,000 RMD income at their bracket

With QCD ($10,000 of the $40,000 RMD goes direct to charity):

• Only $30,000 of the RMD hits AGI
• The $10,000 QCD never appears in income
• Charity receives the same $10,000
• Net taxable: $30,000 of RMD income at their bracket

If their marginal bracket is 22%, the tax savings is $10,000 × 22% = $2,200. They give the same $10,000 to charity. The federal government effectively pays $2,200 of the gift through the QCD mechanism. Same charity, same gift, lower tax bill.

The savings can be even larger if the QCD also pulls them under an IRMAA bracket or out of the Social Security tax torpedo zone — both of which are sensitive to AGI. A QCD that prevents an IRMAA tier increase can save thousands more in Medicare premiums two years out.

Edge cases and limitations

• Can't double-dip. If you take a QCD, you cannot also take an itemized deduction for the same charitable gift. The QCD's tax benefit is the income exclusion; you don't also get the deduction.
• Can't bunch QCDs. The annual limit is annual. Unused capacity doesn't carry over to next year.
• Donor-advised funds are excluded. If your charitable strategy uses a DAF, you can't fund it with a QCD. The QCD has to go to a charity that's not a DAF or private foundation.
• One-time CGA/CRT carve-out (SECURE 2.0). SECURE 2.0 created a one-time, in-life option to use part of your annual QCD limit (currently up to about $54,000 indexed) to fund a Charitable Gift Annuity or Charitable Remainder Trust. The mechanics are specialized and the use case is narrow, but the option exists.
• QCD reduces your IRA balance. Obviously. The QCD comes out of the IRA permanently. If your IRA is your largest retirement asset and you're managing future RMD/income flow, that's a relevant consideration.

The "first-dollar" rule for RMDs

One important wrinkle on the timing. The IRS treats the first dollars distributed from your IRA in a given year as satisfying your RMD. So if you want a QCD to count toward your RMD, you need to do the QCD before taking other IRA distributions that year. If you take your full RMD in January and then do a QCD in November, the November QCD counts toward your RMD limit only to the extent there's an unused balance — and may instead just be a "bonus" charitable gift on top of an already-distributed RMD, with the income exclusion still applying.

Practically: if you plan to do a QCD that satisfies part of your RMD, do the QCD before the rest of the RMD. Or coordinate with your custodian.

How to actually execute

• Contact your IRA custodian — Schwab, Fidelity, Vanguard, etc. — and ask for the QCD request form.
• Provide the charity's name, address, and tax ID number. The custodian needs to make the check payable to the charity and mail it directly.
• Specify the dollar amount. One QCD per request; you can do multiple QCDs in a year up to the annual limit.
• Keep the acknowledgment letter from the charity. Required for tax substantiation, just like any charitable gift.
• Tell your CPA. The 1099-R from your custodian will show the full distribution; the QCD portion needs to be flagged on your tax return so it gets excluded from AGI properly.

What this looks like in practice

If you're 70½ or older, give to charity, and have an IRA — using a QCD instead of writing checks from your bank account almost always saves federal tax. The savings range from a few hundred dollars (small gifts, low brackets) to several thousand dollars (larger gifts, higher brackets, IRMAA-sensitive). The mechanics take twenty minutes once per year. The CPA conversation takes another twenty. The benefit compounds across every year of your remaining retirement.

For couples already itemizing, the math is closer — but the QCD's effect on AGI (and downstream IRMAA, SS taxation, and so on) often still favors the QCD path. For non-itemizers, which is most retirees today, the QCD is essentially free money. The fact that most CPAs don't proactively suggest it is one of the small mysteries of retirement tax planning. Sleep at night, knowing your charitable giving is doing double duty.

The bottom line

Qualified Charitable Distributions allow IRA owners 70½ and older to give directly from an IRA to a qualified charity. The gift is excluded from taxable income, counts toward the RMD, and works whether or not you itemize. The 2026 annual limit is approximately $108,000 per individual. Donor-advised funds and private foundations don't qualify. The mechanics are simple, the savings are real, and most retirees aren't using the strategy. If you give to charity and you're 70½+, you should be doing QCDs.