Is there a smarter way to give?
November 7, 2026
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Show Notes
Eddie and Betty's Conversation
Welcome to The American Retirement Advisor. I'm Betty, Eddie's here with me in the studio today, and we are talking about something that I think is genuinely one of those 'wait, why didn't anyone tell me this sooner' moments in retirement planning. It's called a Qualified Charitable Distribution, and Ian Schaeffer wrote a piece about it that stopped me cold.
Yeah, and I say that as the numbers guy who thought he'd seen most of the tricks. This one is clean. Like, elegantly clean.
So let's set the scene. A lot of our listeners are already charitable people. They give to their church, their food bank, whatever it is. They write a check every December. And the question Ian Schaeffer is raising is: are you doing it the most efficient way?
And the answer, if you have an IRA and you're over a certain age, is probably not.
Okay, so walk me through the basic idea. What is a Qualified Charitable Distribution?
So instead of pulling money out of your IRA, having it land in your bank account, and then writing a check to the charity, the money goes straight from the IRA to the charity. It never touches your hands, and more importantly, it never counts as your income.
That's the whole game right there, isn't it.
That's really what it comes down to. Because normally when money comes out of a traditional IRA, it's taxable income. Full stop. A QCD just skips that step entirely.
So it's like the money teleports. IRA to charity, and the tax bill never sees it.
That is a surprisingly accurate description of a tax mechanism.
I have my moments. Now, Ian Schaeffer ties this to something we talked about in a previous episode, the Medicare premium issue. Can you connect those dots?
Right, so this is part of a series and the piece right before this one was about how your RMD income can bump up your Medicare premiums two years later. That's called IRMAA. And the QCD is one of the primary tools for keeping that income number down.
Because it never lands in your AGI at all.
Correct. It's not in your AGI. So it can't trigger those Medicare surcharges. If you were going to give the money to charity anyway, it costs you nothing in terms of your tax picture.
Okay so the first 'wait, really' moment for me was the age requirement. I assumed this was an RMD thing, so I figured you had to be 73 to use it. But that's not right.
Seventy and a half. You have to be 70½ or older on the date of the gift. RMDs start later, at 73 for most people now, so you can actually be using QCDs for a couple of years before you even have a required distribution.
Why would you do a QCD if you don't even have an RMD yet?
Because you're still reducing the balance in your IRA, which means smaller required distributions down the road. It's like trimming the tree before it gets too big to manage.
I love that. Chip away early so the tax bill later just shrinks down.
And if you're already giving to charity, there's no cost to doing it this way instead of the regular way.
Now once RMDs do kick in, the QCD also counts toward satisfying them, right?
It does. All or part of your required minimum distribution can be satisfied with a QCD. So if your RMD is, let's say, twenty thousand dollars and you give twenty thousand to charity as a QCD, you've checked the RMD box and none of it hits your income.
That's wild. You're required to take the money out anyway, and you can just route it straight to a cause you care about and owe nothing on it.
That's the whole play. For somebody who was already planning to give, it's worth a serious look.
So let's talk about how much we're talking. Because Ian Schaeffer gives an actual number in the piece and I about fell out of my chair.
One hundred and eleven thousand dollars per person in 2026.
That's each spouse's own limit, pulled from their own IRA.
So theoretically a couple could move two hundred and twenty-two thousand dollars out of their IRAs to charity in a single year, completely income-free.
Most of us aren't giving anywhere near that much a year, but the point is the limit is not going to be the thing that stops you.
Right. And it goes up with inflation, which is something SECURE 2.0 changed starting in 2024. Before that it was a fixed number for years.
Ian Schaeffer mentions that QCDs were made permanent back in 2015. What's the story there?
For a long time they were a temporary provision that Congress kept renewing at the last minute, sometimes retroactively, which was a planning nightmare. 2015 is when it became a permanent part of the tax code, so you could actually count on it year to year.
Planning around something that might not exist next year sounds like a terrible way to live.
Extremely stressful. The permanence matters a lot for people who want to build this into their long-term giving strategy.
Okay, the rules. Because there are rules. And some of them surprised me.
The big one is that it has to come from an IRA, paid directly to the charity. Not a 401(k). Not an active SEP or SIMPLE IRA. And if a check gets made out to you, it doesn't qualify, even if you immediately hand it over to the charity.
So the routing matters. It has to go straight from the IRA, directly to them.
The custodian, whoever holds your IRA, sends the payment to the organization itself. You never touch it.
And not every charity qualifies, right? There are some you might expect to work that don't.
This one surprised me too. Donor-advised funds don't qualify. Private foundations don't qualify. Supporting organizations don't qualify. It has to go to an eligible public charity, the kind most people think of when they think of a charity, but the specific exclusions are worth knowing.
So if someone has been parking money in a donor-advised fund thinking they'd get this benefit, they wouldn't.
Correct. And that's exactly the kind of detail where you want to double-check with your tax professional before you set anything up, because the consequences of getting it wrong are that it just counts as regular taxable income.
Not the end of the world, but not what you were going for.
Exactly. You lose the whole benefit.
Now the article also mentions something called a one-time QCD option. There's a wrinkle there I hadn't heard of before.
Yeah, so SECURE 2.0 added the ability to do a one-time QCD of up to fifty-five thousand dollars to either a charitable gift annuity or a charitable remainder trust. This is separate from the regular annual limit.
The number in the article for 2026 is fifty-five thousand for that one-time option.
Right. And those are specialized giving vehicles, so the details there are really a conversation for an advisor and a tax professional who can look at your specific situation. I wouldn't try to DIY that one.
That feels like a 'bring the whole team' moment.
That's exactly the situation where you really need individual guidance. The concept is in the article, but the mechanics of whether it makes sense for a particular person are something our team at American Retirement Advisors would really need to work through with someone individually.
Okay, so here's a thing that I want to make sure listeners don't miss. There's a common way people try to get a tax benefit for charitable giving, which is the itemized deduction. And the QCD is different from that. Can you explain why?
So when you give to charity the normal way and you itemize your deductions, you deduct the gift. With a QCD, you can't also deduct it. The trade is: instead of getting a deduction, you get income exclusion. The money never counts as income at all.
And those are not the same thing.
They're really not. A deduction reduces your taxable income. An income exclusion means the money was never income in the first place. For many retirees, especially people who take the standard deduction, the QCD is the better deal because they weren't getting the charitable deduction anyway.
So the people who are just writing checks to charity every year and taking the standard deduction, they're leaving this on the table.
Most of them, yes. And that's the whole point of Ian Schaeffer's piece. It's a tool that most people have never heard of, even people who've been giving to charity for decades.
That part really stuck with me. This is not an obscure edge case, this is a significant provision in the tax code that a lot of generous, well-meaning folks are just not using.
And it's not complicated once you know it exists. The steps are pretty straightforward. You call your IRA custodian, you tell them you want to do a QCD, they send the check to the charity, you keep the charity's acknowledgment letter, and you tell your tax professional it was a QCD so it gets reported correctly.
That last part matters, doesn't it. They need to know it was a QCD.
Critical. If your tax person doesn't know it was a QCD, it can end up reported as ordinary income, which defeats the whole purpose.
So the documentation step is not optional.
Get the acknowledgment from the charity, keep it, and have the conversation with your tax pro.
Ian Schaeffer also mentions that you want to confirm the current year's limit before you give, which I thought was a good practical note since the limit moves with inflation now.
Right, a hundred and eleven thousand is the 2026 number. Future years, it adjusts. So don't assume it's the same number without checking.
The full rules are in David Schaeffer's guide, which is called The Hidden History of the Rule That Taxes Your Retirement. If you want to go deeper, that's where you go.
And sitting down with an advisor before year-end is time well spent for exactly this reason. The article suggests asking whether a QCD fits before your year-end gifts go out. That timing matters.
Because if you've already written the check, you've already given up the benefit.
Once the money's out of your IRA and in your account, it's income. There's no fixing it after the fact.
So the action item is: before you give, ask. Don't give first and figure it out later.
That's the whole takeaway.
Let me just recap the 'wait, really' moments from this one, because there were several. That income exclusion piece we talked about earlier, where it just disappears from your taxable income entirely, not even touching the deduction side of things, that one still gets me. You can start at 70½, which is before RMDs even begin. The limit per person is a hundred and eleven thousand dollars in 2026. And donor-advised funds, which a lot of people use for charitable giving, don't qualify.
That one gets folks every time. It feels like it should work and it doesn't.
If you're sitting there going, 'okay, I give to charity, I'm over 70 and a half, I have an IRA, this sounds like it's for me,' it probably is worth a conversation.
And the good news is it's not complicated to start. It's just: is this the right move given what I give and what my income picture looks like? That's a one-meeting question for most people.
The specifics of whether it works for your situation, what your custodian's process is, how to make sure it gets reported right, those are things to work through with real people who know your numbers.
And who know the current year's rules, because this stuff does shift.
Our team at American Retirement Advisors can help you work through exactly that. You can start the conversation at no cost to you, and Ian Schaeffer's piece has a link to do just that. If you want to plan your giving alongside your tax professional, that's the first step.
The article is clear that this is education, not tax or legal advice. So take what you've learned here, bring it to your advisor, and let them help you make it real for your situation.
If you're already someone who gives, you deserve to do it in the way that costs you the least. That's not greedy, that's just smart. Thanks for listening, and we'll see you next time.