global Tax The Smartest Way to Give to Charity in 2026: Why QCDs Remain Essential January 22, 2026 For retirees over 70½, Qualified Charitable Distributions (QCDs) remain the smartest, most tax-efficient way to give, especially with new charitable deduction rules coming in 2026. The One Big Beautiful Bill Act (OBBBA) introduces some temporary changes to charitable giving rules, with limits taking effect in 2026. These changes will impact how some taxpayers can deduct charitable gifts, particularly for those who itemize or make large donations. But there’s good news for those over 70½: Qualified Charitable Distributions (QCDs) are not impacted by these changes. In fact, for many taxpayers, QCDs may remain a tax-efficient way to give. Quick Takeaways QCDs are unaffected by OBBBA changes: Even with new limits coming in 2026, QCDs remain a powerful giving tool.Reduce taxable income: Direct transfers from your IRA to qualified charities are excluded from taxable income, even if you don’t itemize. One important note, QCD’s cannot be used to fund donor-advised funds (DAFs).Count toward RMDs: QCDs satisfy your Required Minimum Distribution requirements while supporting your favorite charities.Helpful for estate planning: QCDs can reduce IRA balances over time, potentially lowering the taxable amount left to beneficiaries, since inherited IRAs are generally subject to income tax. What’s Changing for Charitable Deductions under the OBBBAStarting in 2026:Non-itemizers can deduct up to $1,000 ($2,000 for married couples) in charitable contributions.Itemizers face a new 0.5% of AGI floor and a cap on deductions for high earners, limiting the tax benefit of large donations.What is a Qualified Charitable Distribution (QCD)?A Qualified Charitable Distribution (QCD) is a transfer of up to $111,000 in 2026 directly from your Individual Retirement Account (IRA) to a qualified charitable organization. QCDs are particularly beneficial because:They lower your taxable income by excluding the amount from your gross income.They are considered an “above-the-line” deduction, meaning they reduce your income even if you don’t itemize.They count toward your Required Minimum Distribution (RMD).Using them can help reduce your IRA balance over time and lower the overall tax hit. IRAs aren’t very tax-friendly to pass on when you die. They can be subject to estate tax, and your beneficiaries usually owe income tax when they take money out. Especially with new OBBBA limits coming next year, now is a great time to consider using QCDs for your charitable giving. Example: How a QCD Made a DifferenceTo illustrate, consider Mary who is 72 years old and planning her charitable giving for the year. Mary has a $150,000 IRA and normally would take her RMD of $12,000 for the year. She also wanted to donate $10,000 to her favorite charity.Without a QCD:Mary would withdraw $12,000 from her IRA (fully taxable), then make a $10,000 donation from her after-tax income.Her taxable income would increase, potentially affecting her Medicare premiums and Social Security taxation.With a QCD:Mary directed $10,000 of her IRA distribution straight to the charity as a QCD.That $10,000 was excluded from taxable income, reducing her total taxable income for the year.Only $2,000 of her RMD was taxed, and she fully satisfied her charitable goal efficiently.Planning Tips for Charitable GivingWhen it comes to QCDs, specifically, if you are 70½ or older:Evaluate your donation amount: You can give up to $111,000 for 2026.Coordinate with other donations: If you typically itemize or give through a donor-advised fund, think about “bunching” contributions to maximize deductions before the 2026 AGI floors and caps take effect.Taking action now can help you maximize the impact of your charitable giving while keeping more of your retirement income for your personal goals.
