Qualified Charitable Distributions From IRAs

Tax News You Can Use | For Professional Advisors

November 24, 2025

Qualified Charitable Distributions (QCDs) from traditional IRAs are not a new concept. They first became available in 2006, and Congress made them permanent in 2016. The SECURE and SECURE 2.0 legislation in 2019 and 2022 made helpful modifications to the QCD rules, making them an important charitable planning option for many more IRA owners. As we look to 2026, when provisions of the One Big Beautiful Bill Act (OBBBA) will restrict the charitable income tax deduction, QCDs will become even more attractive.

Tax Benefits Of A QCD

The QCD rules allow the owner of a traditional IRA or an inherited IRA who is over age 70 ½ to direct a distribution up to a fixed amount to a public charity without taking that distribution into income. The maximum permitted QCD amount is indexed for inflation: The limit is $108,000 for 2025, rising to $111,000 for 2026. Each spouse who is over age 70 ½ can make their own QCD from their own IRA. The distribution counts toward your required minimum distribution (RMD) from the IRA for the year, but you can make a QCD of up to $108,000 even if your RMD is less than that amount or if you have no RMD because of your age. Note that the age of eligibility for a QCD is still 70 ½, even though the SECURE and SECURE 2.0 acts raised the required beginning date for RMDs from an IRA.

The QCD offers tax benefits that can be more significant than other kinds of charitable gifts. You may exclude the amount from your gross income even if you take the standard deduction (i.e., if you do not itemize your deductions). This can be more valuable than a deduction because the amounts are not included in your modified adjusted gross income (MAGI), which is used to calculate your eligibility for other tax credits, including the child tax credit and credits for the elderly or permanently disabled. MAGI also determines the amount of any Medicare Part B and Part D premium surcharges and whether you are entitled to certain deductions, such as the increased SALT cap or the deduction for overtime income. The exclusion of a QCD from the taxpayer’s MAGI makes it more advantageous from an income tax perspective than withdrawing assets from the IRA (which makes them part of your income and thus MAGI) and then making a charitable gift.

Impact Of OBBBA

QCDs are even more attractive after OBBBA for several reasons. First, OBBBA extended the higher standard deduction. This means that fewer taxpayers will itemize deductions and benefit from a separate charitable contribution deduction. A QCD is an exclusion from income and not a deduction. Furthermore, under OBBBA, for taxpayers who itemize, charitable donations of up to 0.5% of the taxpayer’s AGI are not deductible, and the benefit of the deduction is reduced by 2% for those in the top (37%) tax bracket. Neither of these limits impacts the tax benefits of a QCD.

The table below shows the difference between taking an RMD of $111,000 in 2026 and making a gift of the proceeds to charity with a QCD of $115,000 (single taxpayer)

Calculations are for illustrative purposes only. Please consult your tax preparer to determine how these rules would apply to your situation.

If the taxpayer takes the RMD and gives it all to charity, their charitable deduction is reduced by $4,055 (0.5% of AGI) for the charitable deduction floor, and by $5,780 (2/37 of the charitable contribution) for the ceiling for taxpayers in the 37% bracket.

Details That Matter

Additional rules applicable to QCDs include:

• QCDs can only be used for gifts to public charities, so private foundations are excluded. In addition, donor advised funds and supporting organizations are also not permitted recipients.
• If you are still making deductible contributions to your retirement accounts in a year in which you make a QCD, the limit on a QCD will be decreased in accordance with a formula based on the amount of your retirement plan contributions and your prior QCDs. If you are in this situation, contact your tax preparer before making the QCD to find out what your particular limits are.
• If you already took funds out of your IRA for your RMD, you cannot replace that RMD with a QCD later. The first dollars out for the year count as the RMD. If your QCD is less than the RMD amount you are required to withdraw, you will need to withdraw the rest but can count the QCD as a partial RMD.
• The charitable gift substantiation requirements apply to QCDs in the same way as other charitable gifts.

Decisions about whether a QCD is a good option for you should be made with your tax preparer, considering your income needs, your tax bracket, the size of your RMD and other factors. You will need the receipt from the charity, and your tax preparer will need to report the distribution as a QCD.

QCD Changes to form 1099-R

Distributions from an IRA are reported to the taxpayer on Form 1099-R. Previously, there was an aggregate amount reported that did not distinguish between QCDs and other distributions. The IRS has issued a new code for form 1099-R (code Y) for reporting known QCDs to the taxpayer. This is being phased in, so you may see it on forms 1099-R for 2025 and will likely see it for 2026. The important thing to remember is that the number with code Y may not include all of your QCDs, particularly if you have a check-writing type IRA, and more dollars may be reported as QCDs than you can count as QCDs if you have more than one account. A taxpayer still needs to keep records of QCDs along with the receipts from the charitable organizations as documentation for their tax return.

Combining A QCD With A Charitable Remainder Trust Or Gift Annuity

There is now a new option for QCDs. Up to $54,000 of a QCD can be contributed to a charitable remainder trust (CRT) or used to acquire a charitable gift annuity in 2025 (this limit will rise to $55,000 for 2026). These vehicles split the benefit between the charity and the donor — in each case, the donor is entitled to an annuity and the remaining assets pass to the charity. Unlike a regular QCD, the donor receives an annuity. Unlike an IRA, assets not used to pay the annuity do not pass to the donor’s beneficiaries, and the assets are not subject to estate tax. This benefit can be used only once in your lifetime.

Only the donor or the donor’s spouse can be the annuitant, and they must receive a minimum 5% annuity. While it is possible to create an annuity for the joint lives of two spouses, the actual numbers may fail to meet the other CRT requirements, depending on the ages of the spouses. The annuity payments received from the CRT or charitable gift annuity will be ordinary income to the donor upon receipt. The costs of creating and administering a CRT of this size may make this tool less useful, and many charities have minimum dollar requirements to administer CRTs that are higher than $54,000.

However, charitable gift annuities are less administratively complex because they are a pooled vehicle (assets are invested and accounted for alongside those of other donors) and more charities are willing to administer a $54,000 charitable gift annuity. Note that not all charitable organizations are equipped to administer charitable gift annuities, but many colleges and universities, national charities, and hospital foundations do accept them.