What Are Qualified Charitable Distributions?

Every year, individuals with traditional IRAs face required minimum distributions that increase their taxable income, potentially pushing them into higher brackets or triggering costly phaseouts. For retirees who prioritize giving back to their communities, these mandatory withdrawals can seem like missed opportunities.

Qualified charitable distributions (QCDs) offer a powerful solution to this challenge. By enabling direct transfers from retirement accounts to qualified charitable organizations, QCDs allow donors aged 70½ or older to fulfill their required minimum distributions while supporting causes they care about most. Unlike standard withdrawals that count as taxable income, QCDs transfer directly to charity and never appear on your tax return as income, potentially reducing your adjusted gross income and overall tax liability.

Whether you’re interested in supporting disaster relief in Houston, wondering how to set up a scholarship fund to support education, or want to partner with a community foundation to address other local needs, QCDs may provide a tax-advantaged pathway to meaningful charitable giving.

If you or a loved one is curious about how QCDs can count towards your RMDs, call Greater Houston Community Foundation at 713-333-2210 or reach out directly to get started.

Key Insights

• Qualified charitable distributions allow individuals aged 70½ or older to donate directly from IRAs to qualified charities without the distribution counting as taxable income.
• QCDs can satisfy required minimum distribution requirements while potentially reducing adjusted gross income and overall tax liability.
• The annual QCD limit for 2026 is $111,000, indexed for inflation, providing retirees with flexible giving options up to the maximum allowable amount.
• Eligible retirement accounts include traditional IRAs, inactive SEP IRAs, and SIMPLE IRAs, though certain restrictions apply.
• QCDs cannot be made to donor advised funds but can be directed to Field of Interest Funds and Designated Funds at Greater Houston Community Foundation.
• Proper documentation and direct transfers from financial institutions to qualified charities are essential for QCD compliance.

Table of Contents

• What qualifies as a qualified charitable distribution?
• Why is a QCD better than a charitable deduction?
• Pros and cons of taking qualified charitable distributions in Texas
• Important QCD rules to be aware of
• How does the IRS know you made a QCD?
• QCD FAQ
• Incorporate QCDs into your giving strategy with The Community Foundation

What qualifies as a qualified charitable distribution?

A qualified charitable distribution (QCD) is a direct transfer of funds from an individual retirement account to a qualified charitable organization. Unlike traditional retirement account withdrawals that increase your taxable income, QCDs move directly from your IRA custodian to the charity of your choice, bypassing your personal accounts entirely.

The PATH Act of 2015 permanently established this strategic giving option for retirees, allowing individuals aged 70½ or older to make tax-advantaged charitable contributions directly from their retirement savings. A few criteria must be met for a distribution to qualify as a QCD:

• The donor must be at least 70½ years old at the time of the distribution. This age requirement has remained unchanged despite changes to required minimum distribution ages.
• The transfer must move directly from the IRA trustee to the qualified charitable organization. Personal withdrawals followed by charitable donations do not qualify.
• The receiving organization must be a 501(c)(3) public charity eligible to receive tax-deductible contributions. Private foundations, donor advised funds, and supporting organizations are generally excluded.
• The distribution must be otherwise eligible for charitable contribution tax deductions, meaning you cannot receive goods or services in exchange for the gift.

When organized correctly, QCDs count toward your required minimum distribution for the year, while never appearing as income on your tax return. This dual benefit makes QCDs particularly effective for retirees who are seeking to prioritize charitable giving and manage their tax liability.

Why is a QCD better than a charitable deduction?

At first glance, the advantage of QCDs over traditional charitable deductions may not be obvious—after all, both approaches support charitable organizations while providing tax benefits to donors—but the structural differences between QCDs and straight deductions make for distinct advantages.

Traditional charitable deductions require you to itemize deductions on your tax return to receive any benefit. With the standard deduction at historically high levels following recent tax law changes, many retirees find that their total itemized deductions no longer exceed the standard deduction threshold. QCDs bypass this limitation entirely by excluding the distribution from your taxable income in the first place.

Additionally, QCDs offer administrative simplicity that traditional charitable giving can’t match. When you make a QCD, you receive a single distribution statement from your IRA custodian and a receipt from the charitable organization. You don’t need to track multiple donations throughout the year or maintain extensive charitable giving records for tax purposes.

For donors considering strategies like bunching charitable contributions to maximize tax benefits in alternating years, QCDs provide consistent annual tax advantages without the complexity of timing large contributions or establishing additional giving structures.

Pros and cons of taking qualified charitable distributions in Texas

What are the benefits of QCDs?

The benefits of qualified charitable distributions extend beyond simple tax savings into many broader financial planning advantages. The tax benefits of charitable donations through QCDs include a handful of key benefits that resonate particularly well with Texas retirees looking to mitigate federal tax obligations:

1. AGI reduction. Lower adjusted gross income from QCDs has a range of benefits, but includes helping manage Medicare premium surcharges, which can be substantial for higher-income retirees. 
2. RMD satisfaction. QCDs fulfill required minimum distribution obligations without increasing taxable income, allowing retirees to maintain lower tax brackets and preserve more of their Social Security benefits from taxation.
3. Simplified administration. Direct transfers from IRA custodians to charities eliminate the need to coordinate donations across multiple accounts or maintain detailed charitable contribution records for tax purposes.
4. Flexible giving amounts. You can direct QCDs to multiple qualified organizations during the year, supporting a number of varied causes up to the annual limit without complex paperwork.
5. No itemization requirement. Unlike traditional charitable deductions, QCDs provide tax benefits whether you itemize or claim the standard deduction, making them valuable even when your total itemized deductions don’t exceed the standard deduction threshold.

Beyond tax considerations, QCDs can allow you more flexibility and intentionality in your giving, by allowing you to separate giving decisions from immediate cash flow needs. Many retirees find that they can make more substantial contributions through QCDs than they would through traditional giving because the funds come directly from accumulated retirement savings rather than monthly income.

What are the disadvantages of a QCD?

While QCDs offer countless advantages for charitable giving, they do have their limitations. Some limitations of QCDs donors might want to consider include:

Despite these limitations, for most donors who meet the age requirement and wish to support qualified public charities, the advantages of QCDs substantially outweigh the restrictions. Working with experienced philanthropic advisors at Greater Houston Community Foundation can help you navigate these constraints while still maximizing the impact of your charitable giving.

Important QCD rules to be aware of

We’ve already touched on some of the following qualified charitable distribution rules, but these specific restrictions and limitations bear repeating. 

1. Age restrictions. Donors must be at least 70 ½ years of age to make qualified charitable distributions. 
2. Annual limits in 2026. The individual annual limit for QCDs is projected to be $111,000.
3. Direct transfers. Distributions must be made directly from an eligible account to a qualified charity. They do not qualify as a QCD if they are distributed to the owner as a payment first.
4. Eligible accounts. Not all retirement accounts may be eligible for charitable donations. Typically, traditional IRAs, Roth IRAs, and certain other retirement accounts qualify.
5. Eligible charities. QCDs must be directed to 501(c)(3) charities, Field of Interest Funds, and Designated Funds. QCDs cannot be transferred to donor advised funds, supporting organizations, or private non-operating foundations. 

Although many rules surrounding qualified charitable distributions are relatively simple, you should always speak with a trusted advisor who is familiar with your financial and charitable giving plans before making decisions with your retirement accounts.

How do you claim a QCD? How does the IRS know you made a QCD?

Although QCDs themselves are not taxable income, they still need to be reported on your taxes. Luckily, claiming a qualified charitable distribution is a very simple process. 

1. Your IRA custodian will issue Form 1099-R reporting all distributions from your retirement account during the year, including any QCDs. QCDs from non-inherited IRAs are counted as normal distributions, while those from inherited IRAs are reported as death distributions.
2. When preparing your tax return, you report the QCD on Form 1040 on the line for IRA distributions. Make sure that the taxable amount is listed as zero.
   1. Many taxpayers write “QCD” next to this line to clarify the reason for the difference between the total distribution and taxable amount, though this notation is optional.
3. Always keep records of your charitable contributions and confirmations from the organizations to whom you donate. You should retain proof of your donation for several years in case of an audit.  

When you direct a QCD to the Community Foundation or to funds held at the Community Foundation, you’ll receive proper acknowledgment letters that satisfy IRS requirements. Our development team can also assist in coordinating with your IRA custodian to ensure smooth transfer processing and complete documentation.

Continue reading: What is a community foundation?

QCD FAQ

Do churches qualify for QCDs?

Churches and other religious organizations qualify to receive QCDs as long as they maintain 501(c)(3) tax-exempt status. Most churches meet this requirement and can accept QCD transfers from your IRA custodian just like other charitable organizations.

Are charitable contributions from IRAs no longer allowed in 2026?

No! This is a common misconception among retirees doing their tax planning, but because the PATH Act of 2015 made QCDs a permanent feature of the tax code, they remain fully available in 2026 and beyond.

Confusion about QCD availability in 2026 may stem from the scheduled sunset of various Tax Cuts and Jobs Act provisions at the end of 2025. While many tax code elements will revert to their pre-2018 structures after 2025, QCD rules are not among the provisions affected by the tax sunset.

Changes to other aspects of the tax code after 2025 could affect the relative attractiveness of QCDs compared to other giving strategies; if the standard deduction decreases, for example, more taxpayers might find traditional charitable contribution tax deductions more worthwhile.

What is the QCD limit in 2026?

You may transfer up to $111,000 individually (potentially $222,000 for you and your spouse) from one or more IRAs to a qualified charitable organization. 

Can I make a distribution or gift to my donor advised fund? 

No, QCDs are prohibited from being given to a donor advised fund. 

Can I direct a QCD to my fund at the Community Foundation? 

While donor advised funds are not eligible recipients for QCD funds, many types of charitable funds are, including Field of Interest, Designated funds, and Scholarship funds.

Can I make a QCD even if I am not required to take an RMD? 

Short answer: Yes, but only if you are between the ages of 70½ and 72 years old. 

Long answer: The SECURE Act’s adjustment of the required minimum distribution (RMD) age from 70½  to 72 has created an anomaly, as the qualified charitable distribution (QCD) age remains unchanged at 70 ½. This discrepancy can be beneficial for taxpayers who wish to make charitable gifts from their IRAs before taking their RMDs, but it may also lead to unintended consequences, such as accelerated income taxation.

What is the difference between a QCD and an RMD? 

Required minimum distributions (RMDs) are mandatory withdrawals from retirement accounts that are treated as taxable income. Qualified charitable distributions (QCDs), if used correctly, can count towards these mandatory withdrawals in a tax-advantaged manner. 

Can I only use an IRA to make QCDs?

You can use traditional IRAs to make QCDs, as well as SEP and SIMPLE IRAs that are inactive (i.e., not receiving employer contributions for the year). Roth IRAs are also permitted to make QCDs; however, doing so is generally not recommended because qualified distributions from Roth IRAs are already tax-free, resulting in little or no additional tax benefit.

Interested in incorporating QCDs into your giving strategy? The Community Foundation can help.

If you’re currently subject to required minimum distributions and have not yet explored how qualified charitable distributions can enhance your charitable giving strategy, now is the time to have that conversation. We understand that donating retirement assets can be complex, especially when your giving is inextricably linked to your tax strategies and over philanthropic goals. 

Greater Houston Community Foundation specializes in helping donors navigate the intersection of charitable giving and financial planning. Our team works alongside your existing professional advisors—financial planners, CPAs, and estate attorneys—to help make sure your QCDs align with your broader wealth management and legacy planning objectives.

Ready to explore how qualified charitable distributions can enhance your philanthropic strategy while potentially reducing your tax burden? Call Greater Houston Community Foundation at 713-333-2210 or reach out directly to start a conversation about incorporating QCDs into your giving plan. 

More Helpful Articles by Greater Houston Community Foundation: 

• Charitable Deduction Carry Forward: Making the Most of Your Donation
• How To Maximize Charitable Deductions
• Donating Art to Charity: Rules, Valuations, and Tax Benefits
• The Importance of Charitable Giving In Financial and Estate Planning
• Your Guide to Making Noncash Charitable Contributions

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