With tax rates where they are, a Qualified Charitable Distribution (QCD) from your IRA could lower your AGI,
satisfy your RMD and help you avoid costly Medicare surcharges. Bryon Townsend, CFP® explains how.
Should I Use a QCD from My IRA to Lower My 2026 Tax Bill?
A few years back, I had a client, a retired engineer from the Houston area, sharp guy, gave
generously to his church every single year, who called me in early spring absolutely frustrated. His
Medicare premiums had jumped, his tax bill was higher than expected, and he had no idea why. We
pulled up his return together and spotted it immediately. He had taken his full Required Minimum
Distribution as a taxable withdrawal, written a separate check to his church, and assumed everything
would even out. It didn't. Not even close.
Here's the thing: he was doing everything right in terms of intentions. He just didn't know about the
QCD.
If you're over age 73 and you give to charity, a Qualified Charitable Distribution — or QCD — from
your IRA may be one of the most powerful tax tools available to you in 2026. It satisfies your
Required Minimum Distribution (your annual IRS-mandated withdrawal from a traditional IRA), keeps
your Adjusted Gross Income lower, and gets money to the causes you care about without that money
ever appearing on your tax return as income. You don't have to itemize deductions to get the benefit.
It works either way.
With the expiration of the Tax Cuts and Jobs Act pushing rates back up in 2026, this isn't just a
planning footnote anymore. For a lot of retirees I'm working with right now, it's become a centerpiece
of the whole strategy.
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What Exactly Is a QCD, and How Does It Work?
A Qualified Charitable Distribution is a direct transfer of money from your traditional IRA to a
qualifying charity. You never touch the money. It goes straight from the IRA custodian to the nonprofit.
According to IRS Publication 590-B (2024), to use a QCD you must be at least age 70 1/2 at the time of
the distribution. The funds have to go directly to a qualifying public charity, not to you first, not to a
donor-advised fund, and not to a private foundation. The charity must be a 501(c)(3) organization
eligible to receive tax-deductible contributions.
For 2025, the IRS set the QCD limit at $105,000 per person per year, per IRS Rev. Proc. 2024-40
(October 2024). That limit adjusts for inflation, so the 2026 amount is $111,000. A married couple with separate IRAs can each
contribute up to the annual limit, effectively doubling the benefit.
The key mechanic here: the QCD amount is excluded from your gross income entirely. It's not a
deduction, it never shows up as income in the first place. That's a meaningful distinction, and I'll
explain why in a minute.
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Does a QCD Count Toward My RMD?
Yes. Dollar for dollar.
Your RMD (Required Minimum Distribution) is the amount the IRS requires you to withdraw from your
traditional IRA each year once you hit age 73. According to IRS Publication 590-B (2024), the RMD
rules exist because the government gave you a tax deferral on those contributions for decades and at
some point they want their cut.
Here's where the QCD shines: if your RMD for 2026 is $18,000, and you send $18,000 directly to
your church or your favorite local charity, you've satisfied your entire RMD — and none of it hits your
taxable income. Compare that to the alternative, where you take the $18,000, pay ordinary income
tax on it, and then write a check to the charity. Even if you itemize and deduct the charitable
contribution, you're still netting out worse in most cases. And with the higher standard deduction
levels of recent years, most retirees aren't itemizing anyway.
According to the AARP Public Policy Institute (March 2024), the majority of retirees who give to
charity do not itemize deductions. For that group, the QCD is essentially the only way to get any
federal tax benefit for charitable giving at all.
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Why Does Keeping My AGI Low Actually Matter?
This is where I see people leave real money on the table, and it's the part of the QCD conversation
that I think doesn't get enough attention.
Your Adjusted Gross Income (AGI) affects more than just your income tax bracket. It affects
whether you owe IRMAA surcharges on your Medicare premiums.
IRMAA stands for Income-Related Monthly Adjustment Amount. It's essentially a penalty tacked onto
your Medicare Part B and Part D premiums if your income exceeds certain thresholds. According to
the Centers for Medicare and Medicaid Services (September 2024), the 2026 IRMAA thresholds start
at $109,000 for individuals and $218,000 for married couples filing jointly. Medicare uses your income
from two years prior to determine your surcharge, so your 2026 Medicare premiums will be based
on your 2024 income, and your 2027 premiums will be based on 2025 income.
An extra $10,000 or $15,000 in AGI from an RMD you didn't need to take in cash can push you into
the next IRMAA bracket. That surcharge can run several hundred dollars a month — sometimes
more. The client I mentioned at the start of this post? That's exactly what happened to him.
A QCD keeps that income off your return entirely. It doesn't touch your AGI. For retirees walking a
fine line near an IRMAA threshold, this isn't a minor planning detail. It can literally be worth thousands
of dollars per year.
The Tax Policy Center (January 2025) noted that with the expiration of the TCJA, marginal rates for
many middle- and upper-middle-income retirees are reverting to pre-2018 levels. That means more
income at a higher rate, which makes the AGI management piece even more critical going into 2026
and beyond.
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What About My Donor-Advised Fund? Can I Send the QCD There?
This one comes up a lot, and I want to be direct about it:NO.
A donor-advised fund (DAF) is a charitable giving account that lets you contribute money, take an
immediate deduction and then recommend grants to charities over time. Great tool. I use them with
clients regularly. But the IRS does not allow QCDs to go to donor-advised funds, private foundations,
or supporting organizations.
The distribution has to go directly to a public charity that is eligible to receive tax-deductible
contributions. If your estate plan involves a DAF as a primary giving vehicle, we need to think through
how to coordinate that with your QCD strategy, because you can't just route one through the other.
I had another client who tried to do exactly this. She sent her QCD to her donor-advised fund thinking it
would all sort out the same way. It didn't. We had to untangle it during tax prep. Not a disaster, but
definitely an avoidable headache.
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So Should YOU Be Doing a QCD in 2026?
If you're over 70½, have a traditional IRA, or 73 with required distributions, and give to charity with any
regularity, the answer is almost certainly yes.
But here's the honest caveat: every situation is different. QCDs work best when coordinated with your
overall income picture, your Medicare planning, your Roth conversion strategy (if you have one), and
your estate goals. They're a tool, not a blanket answer. In my 30 years of doing this work as a CFP,
I've seen the same tool work beautifully in one situation and create complications in another simply
because the surrounding plan wasn't aligned.
The good news is that the mechanics of a QCD are actually simple to execute once the decision is
made. You contact your IRA custodian, request a direct distribution to the charity, and make sure you
get written acknowledgment from the nonprofit. Keep good records. Tell your CPA so it's reported
correctly on your return.
That retired engineer I told you about at the start? The next year, we set up a QCD for him. Satisfied
his RMD, stayed under the IRMAA threshold, and he gave money to his church. He called me after
he saw the tax return and said it was the first time in years his spring didn't come with a side of
indigestion.
That's what a well-placed tool looks like.
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If you're wondering whether a QCD makes sense for your specific situation in 2026, I'd be glad to walk through it with you. Reach out through the contact page, email me at BryonT@wranderson.com or give the office a call 281-974-1965. Sometimes it takes one conversation to see whether this fits cleanly into your plan or whether there's a better angle we haven't explored yet.
Cetera Advisors LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice.
Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. Donors take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later.