RMDs and QCDs: A Year-End Giving and Withdrawal Playbook for Retirees
Most of us appreciate the sentiment behind the phrase, “Doing well by doing good”: the idea that, sometimes at least, doing something that benefits the greater good might also give the doer a leg up on personal prosperity.
Along that same line of thought, an opportunity exists for many retirees to improve their financial circumstances (i.e., reduce next April’s tax bill) and also benefit the community and the greater society by supporting a valued charitable cause. They can do this by using a qualified charitable distribution (QCD) to fulfill their obligation to take a required minimum distribution (RMD) from a traditional retirement account before the end of the year.
Why does that matter? For many retirees, required minimum distributions from traditional retirement accounts (IRAs, 401(k)s, 403(b)s, and others) can push their retirement income into a higher tax bracket. But, because most retirees lack access to the variety of deductions from income they could use when they were working, they can sometimes find it hard to maintain their taxable income in the lower marginal brackets that they would prefer.
But there is a way out for some retirees: those who find themselves with “excess” retirement income because of RMDs may be able to take advantage of qualified charitable distribution rules to reduce taxable income and benefit charity at the same time.
What are the qualified charitable distribution rules this year?
A qualified charitable distribution is a gift distributed directly to a qualified charity from a traditional (pre-tax) individual retirement account. In 2026, each individual who has a traditional IRA can give up to $111,000 directly to a qualified charity by using a QCD. But there are some rules to keep in mind:
- Age Limit: You must reach age 70½ on or before the date of the distribution;
- Eligible Accounts: You can make a QCD from a traditional (pre-tax) IRA, an inherited IRA, or an inactive SEP or SIMPLE IRA;
- Ineligible Accounts: You cannot make a QCD directly from an active workplace plan like a 401(k), 403(b), or active SEP/SIMPLE IRA; you must first roll those funds into a traditional IRA.
- Direct Transfer: The IRA custodian must send the money straight to a qualified charity. If the money comes to you first, it does not count as a QCD.
How does a QCD satisfy my required minimum distribution?
When you make a qualified charitable distribution from your IRA, the amount you
contribute is excluded from your taxable income. While you do not receive a charitable
deduction for making a QCD, it does reduce the amount of taxable income you must report
on your return for the year. Also, the amount of the QCD is applied to any remaining required minimum distribution you must take for the year; the QCD can help satisfy your RMD requirement without adding to your taxable income.
What is the deadline to take my RMD?
Those who have reached the age when they must begin taking RMDs ((70 ½–75, depending on your year of birth) must take all required payments by December 31 of each tax year. If this is your first year to take an RMD, you can delay it until April 1 of the year following the one in which you reach RMD age, but keep in mind that this will be stacked on top of the RMD you must take by the following December 31. “Doubling up” in this way could unnecessarily increase your taxable income for the year.
What happens if I miss my RMD deadline?
Remember: your RMD amount is calculated based on the balances of all the pre-tax accounts you own: all IRAs, 401(k)s, 403(b)s, or 457(b) accounts. If you fail to take the full amount of your RMD by the December 31 deadline, the IRS can impose an excise tax of 25% of the amount not taken (this can be reduced to a 10% tax if the error is corrected within two years).
Can a QCD help lower my Medicare premiums (IRMAA surcharge)?
Another benefit of using a QCD that is sometimes overlooked is that, by reducing your taxable income (one component of your modified adjusted gross income, or AGI), it can help you stay in a lower bracket for calculation of your Medicare premiums. Because the QCD is a direct transfer from the IRA custodian to the qualified charity, the money never hits your account and is thus excluded from taxable income. And, because the Medicare income-related monthly adjustment amount (IRMAA) surcharge is based on your tax filing status and your MAGI, the reduction to your taxable income could result in lower Medicare premiums.
Should I consider a QCD before year-end?
If you are at least 70 ½, and especially if you have reached the age where you must begin taking RMDs, you may be able to benefit from using a qualified charitable distribution to reduce your taxable income and meet your RMD obligation for the year. Especially for those who are already supporting a favorite charity, it could make sense to use a QCD to make your next tax return filing season a bit less expensive. Particularly retirees with higher incomes may wish to avoid paying taxes on “extra” income and instead direct those funds to a favored 501(c)(3) organization. High-income retirees may also be concerned about IRMAA surcharges, and a QCD could be a part of the solution.
Your Bloomfield Hills advisor can be a helpful resource if you are wondering whether a QCD could benefit you before year-end. If you would like more information on this or any other important financial matter, please let us know.
