Every December, Frank sits down at his kitchen table with his checkbook and writes the same gift to the church he’s been a member of for thirty years. It’s a habit as familiar as the holidays themselves. What he didn’t always know: how he wrote that check mattered just as much as the gift itself.
A Smarter Way to Give
Once you reach age 70½, you can make a Qualified Charitable Distribution, or QCD. It sends money directly from your IRA to an eligible charity instead of writing a check from your bank account. Most retirement savings are pre-tax dollars (think your 401(k) or a Traditional IRA). A QCD lets you support the causes close to your heart while sidestepping the tax bill that would otherwise come with that withdrawal.
It matters even more once you turn 73 (or 75, depending on your birth year). That’s when the IRS requires you to start taking money out of your retirement accounts each year, whether you need it or not. This amount is referred to as your Required Minimum Distribution, or RMD, and yes, it counts as taxable income. That extra income doesn’t just affect your tax bill. If your total income from sources like Social Security, a pension, and your RMD passes a certain threshold, you may also end up paying a higher premium for Medicare Part B and Part D. A QCD can help with both at once: it satisfies your RMD without adding to your income, which may reduce the chances of crossing that threshold.
A Tale of Two Gifts
Frank never knew any of this. Every December, he wrote his $5,000 check to the church straight from his savings, then took his $5,000 RMD separately, adding it to his taxable income for the year. Because he takes the standard deduction, he can deduct only $1,000 of that gift on his 2026 return as a single filer, under the One Big Beautiful Bill Act.
His neighbor Carol, also 74, is in the 22% tax bracket and gives the same amount to her church at the end of the year. She has her $5,000 sent directly from her IRA to the church as a QCD. Because the money went straight to the church, it never counted as income for her, and she reduced the risk of it raising her Medicare premium down the road.
Same gift. Very different outcomes.
Frank and Carol are fictitious characters used for illustrative purposes only and do not represent actual clients.
Beyond QCDs
A QCD is just one of several ways thoughtful giving and smart tax planning can work together. A few others worth knowing about:
Giving Appreciated Stock
If you own stock, mutual funds, or other investments that have grown in value, selling them and donating the cash means paying capital gains tax on the growth first, then giving away what’s left. Donate the investment directly instead, and you skip that capital gains tax entirely. The charity still gets the full market value, and you may still be able to deduct that value if you itemize. This isn’t just for retirees taking RMDs, either. It works for anyone who’s held an investment for years and has built up substantial unrealized gains.
Donor-Advised Funds
Think of a donor-advised fund as a charitable savings account. You contribute now, and if you itemize, you may be able to take the tax deduction that same year. Then you decide which charities to support whenever you’re ready. Appreciated stock held for more than a year can be contributed, too, which may let you skip the capital gains tax you’d owe if you sold it first. That flexibility makes it a useful tool in your high-income years, when a larger deduction may be especially valuable.
Bunching Your Gifts
Because the standard deduction is higher than it used to be, many people no longer give enough in a typical year for itemizing to pay off. Bunching means combining several years’ worth of giving into a single year, often through a donor-advised fund, so that year’s total clears the itemizing threshold. In the years after, you take the standard deduction and make your grants from the fund as usual. Starting in 2026, itemizers can deduct only the portion of their giving that exceeds 0.5% of their income, and bunching means that floor applies once instead of every year. It’s worth exploring if your annual giving isn’t enough to itemize on its own.
The right strategy depends on your situation. There’s no one-size-fits-all answer here. If you’re already giving this way, or just learning it exists, schedule a consultation and we’ll help you find the approach that fits you best.