Qualified Charitable Distributions (QCDs)

Why Don’t I Get a Charitable Deduction Anymore?

Many retirees ask, “Why don’t I receive a charitable deduction anymore?” The answer often comes down to changes in tax law and misunderstanding the rules surrounding qualified charitable distributions (QCDs).

Under current tax rules, most taxpayers claim the higher standard deduction rather than itemizing. As a result, traditional charitable donations — such as writing a check to your church or favorite nonprofit — may no longer reduce your taxable income. That leads many retirees to wonder: Are charitable donations still tax-deductible?

For retirees age 70½ and older who own an IRA, the better question may be: Are you using a Qualified Charitable Distribution (QCD)?

What Is a Qualified Charitable Distribution (QCD)?

A qualified charitable distribution (QCD) is a direct transfer from your IRA to a qualified 501(c)(3) charity. Instead of taking a taxable IRA distribution and then claiming a deduction, the QCD allows you to exclude the distribution from your taxable income altogether.

This distinction is critical.

QCDs are not “tax deductible” in the traditional sense. Instead, they are excluded from income, which can be even more valuable. Lower taxable income can reduce:

• Income taxes

• Taxation of Social Security benefits

• Medicare premium surcharges (IRMAA)

• Overall adjusted gross income (AGI)

For many retirees, this makes a qualified charitable contribution from an IRA far more efficient than a standard charitable deduction.

Why This Matters Even More in 2026

As of 2026:

• The standard deduction remains high relative to historical levels.

• Many retirees take Required Minimum Distributions (RMDs).

• Fewer taxpayers benefit from itemized charitable deductions.

If you are over age 70½, own a traditional IRA, and donate regularly, you may be overpaying taxes if you are not following current QCD rules.

The annual QCD limit allows eligible individuals to transfer up to the permitted amount per year directly from their IRA to qualified charities. These qualified charitable distributions can also satisfy part or all of your RMD requirement.

The Key Difference: How You Give Matters

The tax savings from charitable giving no longer depend solely on how much you donate — they depend on how the donation is structured.

• Writing a personal check → likely no tax benefit if you take the standard deduction.

• Taking an IRA withdrawal and then donating → increases taxable income first.

• Making a qualified charitable distribution (QCD) → excludes the income entirely.

Understanding what a QCD is, how QCD rules work, and what charities qualify for QCD treatment can mean the difference between paying unnecessary taxes and maximizing your charitable impact.

In today’s tax environment, retirees who give strategically through qualified charitable distributions (QCDs) can potentially lower their tax bill while supporting the causes they care about.

The Standard Deduction Problem

Stated as simplistically as possible, when we do our taxes, we add up our income then we subtract our deductions, and we all have deductions. We either itemize our deductions or, if we don’t have enough itemized deductions to add up to be more than the standard deduction, we automatically take the standard deduction. The standard deduction is an amount that all tax filers use to deduct against their income if their itemized deductions don’t add up to more than the standard deduction.

Prior to the tax law change, the standard deduction for a single person age sixty-five was $6,500 and for a married couple age sixty-five it was $13,000. The new tax law essentially doubled the standard deduction. Now the sixty-five-year-old single person has a standard deduction of $12,950 and a couple age sixty-five has a $25,900 standard deduction. Along with doubling the standard deduction, items that were once eligible to deduct have been taken away. To list a few, state and local taxes are now deductible only up to a maximum of $10,000 annually. Mortgage interest on certain types of home equity loans are no longer deductible. Miscellaneous deductions for professional services such as tax preparation fees and investment management fees are no longer deductible.

The bottom line, with larger standard deductions and fewer items that are eligible to be deducted, most of us will forgo itemizing our deductions and we will end up taking the standard deduction. Previously, about 30% of us itemized. It is now estimated that only 10% of Americans will itemize their deductions in the future.

So, how does this impact those that give to charity? Although gifts to qualified charities are still available as an itemized deduction, most charitable givers will not receive any tax benefit for their donations. Why? Because few will donate enough to charity and have enough other itemized tax deductions to exceed the standard deduction. Therefore, there will be no tax benefits for donating to charity for the 90% of Americans that don’t end up itemizing deductions. Fortunately, there is still a provision in the new tax law that can provide a huge tax relief to retirees who give to charity. A little bit of knowledge can save you thousands.

Tax-free Charitable Contributions through a Qualified Charitable Distribution (QCD)

A qualified charitable distribution (QCD) is a provision of the tax code that allows a withdrawal from an IRA to be tax free as long as that withdrawal is paid directly to a qualified charity.

Think about the tax advantages of doing a QCD:

• You didn’t have to pay income tax when you earned the money you put into an IRA or 401K.
• You didn’t pay taxes on the compound interest your IRA has earned over the years it has been accumulating in the IRA.
• Any money paid directly to a charity using a QCD from your IRA will not be taxed.
• And, QCDs qualify toward satisfying required minimum distribution (RMD) requirements.

The best way to understand the tax savings realized by the use of QCDs is by comparing a couple’s tax liability if they contribute to charity the traditional way, by writing a check to their charity, versus donating to their charity through the use of a QCD.

Example of QCD using a Standard Deduction

Since retiring, Michael and Megan’s income and expenses are fairly predictable. Their annual income consists of $35,000 in social security and $20,000 in pension income. Additionally, because they are over age 70.5, they are required to take $10,000 out of Michael’s IRA as a required minimum distribution (RMD). Therefore, their total gross income is $65,000. They make charitable contributions to their church and to other charities within their community of $7,000 annually.

Because their itemized deductions don’t add up to more than the standard deduction, they take the standard deduction. Notice, they will not get a tax benefit for making the $7,000 contribution to their charities. Their tax bill for the year is $1,637.

Alternatively, if Michael and Megan were to do a QCD and make a tax-free transfer of $7,000 directly to their charities, versus writing a check to their charities, their tax liability would be reduced by $1,612. This $1,612 tax savings resulted not in how much they donated to charity but how they donated to charity.

Before those of you that itemize your taxes become too comfortable and think QCDs are only for those that take the standard deduction, let’s do another example of Jim and Lisa, who plan to itemize their taxes.

Example of QCD using Itemized Deductions

Jim and Lisa’s annual income consists of $35,000 in Social Security, and $40,000 in pension income. Additionally, because they are over age 70.5, they are required to take $60,000 out of Jim’s IRA as a required minimum distribution (RMD). Therefore, their total gross income is $135,000. Contributions to their church and to other charities within their community amount to $25,000 annually.

The payment of $25,000 to charity and a $10,000 payment for state and local taxes are allowable itemized deductions. Because their $35,000 of itemized deductions are more than the standard deduction of $27,000, they plan to itemize. After itemizing, their tax bill ends up being $18,795.

Alternatively, if Jim and Lisa were to do a QCD and make a tax-free transfer of $25,000 directly to their charities versus writing a check to their charities, their tax liability would be reduced significantly. If they were to do a QCD, they would end up taking the standard deduction, but their tax liability would still be reduced by $5,303. Again, this $5,303 tax savings resulted not in how much they donated to charity but how they donated to charity.

Restrictions and Reporting

As beneficial as QCDs are, they unfortunately are not available to all taxpayers and the rules governing these transactions must be followed with exactness or the QCD transaction will be considered a taxable IRA distribution.

Here are the restrictions:

• QCDs are available only to people that are age 70.5 or older.
• QCDs are allowed only from IRA accounts. Distributions from 401Ks and various other types of retirement accounts are not QCD eligible.
• To qualify as a QCD, the distribution must be a direct transfer from the IRA to a qualified charity.
• A maximum of $100,000 annually is allowed to be transferred to charity using a QCD.
• You cannot make a qualified charitable contribution by transferring to a Donor Advised Fund.

One final note of great importance: the IRS and the investment industry have yet to figure how to code QCD so as to maintain the tax-free transfer. Until the IRS comes up with a code to delineate QCD distributions from normal taxable IRA distributions, QCD distributions will be coded as normal taxable distributions. However, the IRS has provided special instructions on how QCDs should be reported on our Form 1040s.

In running projections with our clients, we discovered that in almost every instance, those who give to charity and simultaneously make distributions from an IRA can benefit from doing a Qualified Charitable Donation. I believe that every person over age 70.5, who has an IRA, and who gives to charity should investigate making charitable contributions via QCDs. You or your tax professional can run tax comparisons by paying charitable contributions with cash versus doing a tax-free transfer from your IRA to your charity using an QCD. Many of you will find the tax savings to be significant.

If you are getting close to retirement and will have at least $1,000,000 saved at retirement, click here to request a complimentary copy of Scott’s new book!