Required minimum distributions (RMDs) starting at age 73 or 75 push tax-deferred balances into taxable income — and potentially into a higher bracket. For charitably inclined owners of traditional IRAs, the counter-move in 2026 is a qualified charitable distribution (QCD): transfer up to $111,000 per individual directly from an IRA to a qualified charity, satisfy all or part of your RMD, and exclude the amount from taxable income.
How QCDs Reduce RMDs
- Eligibility: IRA owner age 70½ or older (RMD age is 73 or 75 depending on birth year, but QCD eligibility starts earlier)
- Limit: $108,000 for 2025, $111,000 for 2026 per individual, indexed annually — directly from IRA to 501(c)(3), not to a donor-advised fund or private foundation (with limited split-interest exceptions)
- RMD satisfaction: QCDs count toward the RMD dollar-for-dollar for the year, even though the QCD itself is not taxable and does not count as a charitable deduction (no double benefit)
- Source restriction: QCDs work from traditional IRAs; 401(k) funds must first be rolled to an IRA
Three Schwab strategies to ease RMD burden frame QCDs as the charitable leg: Roth conversions before RMD age to reduce future deferred balances, qualified charitable distributions at RMD age to satisfy and lower the taxable portion, and managing which accounts fund RMDs (exempt accounts like Roths and still-working 401(k)s require no RMD if you own <5% of the employer).
The Tax Advantage
Unlike a taxable RMD followed by a deductible charitable contribution, a QCD never hits adjusted gross income — lowering AGI-driven thresholds for Social Security taxation, Medicare IRMAA, and net investment income. For a retiree in the 22% bracket with a $50,000 RMD who gives $20,000 via QCD, taxable income falls by $20,000, saving ~$4,400 plus potential IRMAA tier avoidance — a better outcome than taking the RMD, paying tax, and then deducting the gift.
QCDs must be completed by December 31 to count for that year's RMD, with the IRA custodian reporting the distribution on Form 1099-R (code the QCD correctly on Form 1040).
Simplify Your Financial Management
RMDs are a tax-planning variable, not a fixed bill. Beancount.io keeps IRA balances, RMD calculations, and QCD postings version-controlled — so the distribution you give and the RMD you satisfy reconcile by year. Get started for free and make philanthropy a tax strategy.