Qualified charitable distributions (QCDs) from individual retirement accounts, have been in the news a lot recently as a very smart and efficient way to make charitable gifts. But are IRA QCDs the best giving plan for everybody?
It is important to understand the basics:
1. You need to be one of the many people who support charitable organizations annually.
2. You must be 70½ years old or older.
3. The funds must be transferred directly from a traditional IRA (or Roth IRA) to a qualified charity like Boys and Girls Clubs of East County Foundation.
The maximum amount for IRA QCDs in 2026 is $111,000 per person or $222,000 for couples with separate IRAs. These transfers are excluded from your taxable income and can count toward any required minimum distributions for the year, thereby lowering your tax bill. Unlike most other charitable contributions, you do not include these transfers as an itemized charitable deduction on your tax return; they are reported as a nontaxable distribution from your retirement plan.
Some practical examples
Example 1: Susan, age 74, is retired and living comfortably on her pension, savings and social security. When she takes her annual required minimum distribution, she is taxed on that amount. Her advisor suggested making her charitable gifts directly from her IRA as a QCD. As a result, she totally avoids taxes on the amounts of her QCDs. Now she makes all her charitable gifts from her IRA funds.
Example 2: Bob and Jane are both 71 and are semi-retired. They enjoy income from several sources but no longer itemize their deductions and plan to give more than the new universal deduction amount to charity this year. They decide to make most of their charitable gifts directly from their IRAs. These amounts are not reported as taxable income and avoid raising the tax rate on their other income.
Example 3: Carol and John, in their early 80s, are wealthy retirees with numerous investments generating more regular income than they spend each year. They are very concerned that their IRA assets could be greatly diminished by income and estate taxes if left to heirs, so they decide to use the maximum each year in IRA QCDs to support their favorite charities like the Boys and Girls Clubs of East County Foundation. They consider this arrangement to be a practical solution to deal with their large RMDs they do not need that would place them in a higher tax bracket and possibly cause other negative results at tax time.
Carol and John also decide to name the Boys and Girls Clubs of East County Foundation as a final beneficiary of any amounts remaining in their IRAs. They enjoy seeing the impact of their gifts now and are moved to know that any remaining funds will be leaving an impactful legacy.
Summing things up
While not for everyone, most people age 70½ or older with an IRA account may wish to determine if the IRA QCD is a good plan for them to make gifts from now and in the future. If you would like a complimentary copy of our 2026 Personal Planning Guide, contact us.
Contact Us
If you have already included us in your plans, please consider letting us know so we can acknowledge you. Our Executive Director, Forrest Higgins, can be reached at 619-440-1600 or forrest@bgcec.org; thank you!