By Jan Lane, AEP®, CAP®, Director of Philanthropy, Central New York Community Foundation
Most of us spend decades building retirement savings with one goal in mind: financial security for ourselves and our families. But what if those same assets could also do something meaningful for the causes and communities you care about in a way that’s more tax-efficient than simply writing a check?
If you’re over age 70½, there’s a good chance your IRA holds that potential right now. It comes in the form of a Qualified Charitable Distribution, or QCD. And if you are charitably inclined and don’t rely on your retirement accounts for everyday income, it may be one of the most powerful planning tools available to you.
From Obligation to Opportunity
A QCD allows individuals age 70½ or older to transfer funds directly from a traditional IRA to a qualified charity (up to $111,000 per person in 2026) without counting that distribution as taxable income.
Under ordinary circumstances, a Required Minimum Distribution (RMD) is added to your gross income for the year, currently starting in the year you turn 73. If you’re already living on Social Security, a pension, or investment income, a large RMD can push you into a higher tax bracket, trigger Medicare premium surcharges, or increase the taxation of your Social Security benefits. A QCD sidesteps all of that. The money goes directly from your IRA to the charity of your choice, never touching your taxable income, even if you take the standard deduction. For those who don’t need IRA withdrawals to pay the bills, a QCD can turn a required minimum distribution into a really meaningful one: satisfy your RMD, support causes you care about, and reduce your tax burden, all in one transaction.
What This Looks Like in Practice
Consider a 74-year-old retiree living on Social Security and investment income who takes the standard deduction and gives generously to causes she cares about. Her gifts are meaningful, but they generate no additional tax savings because she doesn’t itemize.
By redirecting a portion of her RMD as a QCD to qualified charities, she keeps that amount entirely out of her taxable income. The result is a lower adjusted gross income, potentially reduced Medicare premiums, less taxation on her Social Security benefits, and the same charitable impact she would have had anyway. She already gives because she wants to; now the tax code works with her, not against her.
Where Can a QCD Go?
A QCD can go directly to a nonprofit organization you’ve supported for years such as your local food bank, a hospital, a house of worship, or an arts organization. It can also be directed to a community foundation, where it might support an unrestricted fund for broad community needs, a field-of-interest fund focused on education, the environment, or the arts, or a designated endowment that provides annual support to your favorite charities year after year. A QCD directed to an endowment isn’t just a gift — it’s a permanent investment in something you believe in.
One important note: donor-advised funds and private foundations are not currently eligible to receive QCDs.
Tax Law Is Always Changing
Recent changes have made QCDs more flexible than ever. The annual giving limit is now indexed to inflation. A special one-time QCD, sometimes called a “Legacy IRA” gift, now allows donors to fund a charitable gift annuity or charitable remainder trust, creating options for those who want to retain some income while still making a lasting commitment.
Perhaps most significantly, proposed legislation known as the Charity Parity Act would expand QCD eligibility to include employer-sponsored plans such as 401(k)s, 403(b)s, and 457(b)s, eliminating the extra step of rolling workplace assets into an IRA first.
A Simple Idea with Lasting Impact
While reviewing your IRA, take a moment to look at your beneficiary designations. Naming a charity as the beneficiary of your IRA at death is one of the most tax-efficient legacy gifts available. Retirement accounts left to individual heirs are taxed as they’re withdrawn; those same assets pass to a nonprofit completely free of income tax.
QCDs are becoming a natural starting point for broader conversations about values, legacy, and what we want our financial lives to mean. If you’re over 70½, charitably inclined, and not dependent on your IRA for everyday expenses, I’d encourage you to speak with your financial advisor, CPA, or attorney. The mechanics are straightforward. The benefits are real. And the impact on the causes and communities you care about can last for generations.
Jan Lane, AEP®, CAP®, is a director of philanthropy at the Central New York Community Foundation. In her role, she supports charitable planning for individuals, families, and nonprofits and facilitates the Central New York Community Foundation’s legacy planning program. To learn more, contact Jan at jlane@cnycf.org or visit cnycf.org/give.
This article is intended for general educational purposes and does not constitute tax or legal advice. Please consult your financial or legal advisor regarding your individual circumstances.
