Do You Need to Take an RMD From Your IRA?

Are you 70½ or over like some of us?  Do you have an IRA, a 401k, 403b or other retirement account and need to take out a certain amount every year (Required Minimum Distribution or RMD)? Well, you may want to make a QCD (a Qualified Charitable Distribution).

Now there's a way to reduce your taxable income by donating directly from your retirement account to qualifying non-profits, and your investment professional will take care of it for you!

QCDs can start as early as 70½ (the account owner's 70½ birthday), even though minimum distributions aren't required until age 73 (or age 75 if you were born in 1960 or later).

All you have to do is give clear directions: names of the non-profits (e.g. Food Bank, Cayucos Land Conservancy, your church); their addresses, and the amount you'd like to give to each. The amounts are deducted from your retirement account and sent directly by your investment institution to your favorite charities instead of being added to your taxable income.

Here are the details, shared by Scott McManus of Cayucos Wealth:

Save on Taxes While Doing Good Under the Current Tax Law

For many of us folks who are 70 or over and have retirement accounts either from contributions or rollovers from company plans, there is a way to make gifts directly from your retirement account. This has been in effect for many years now, but with the 2017 tax law and the 2025 law that made its key provisions permanent (the One Big Beautiful Bill Act), it makes the utilization of this opportunity a no-brainer for many charitably-minded older people. New rules that take effect in 2026 add to the appeal.

While the 2017 law cut tax rates, it also severely curtailed itemized deductions, and the 2025 law left most of those limits in place. State and local income taxes along with property taxes remain capped. The cap, once $10,000, is $40,000 for 2025 and $40,400 for 2026 (and phases down for higher-income filers), but it is scheduled to drop back to $10,000 in 2030. Miscellaneous itemized deductions like tax preparation fees, investment costs, etc. are still not deductible at all for federal income tax purposes (keep in mind that these limits do not affect state income tax—only federal).

These limits on itemizing are somewhat offset by a higher standard deduction, which the 2025 law made permanent (though taxpayers still have no personal exemption deduction). For single folks over 65, the standard deduction for 2026 is $18,150. For married folks filing jointly who are both over 65, the standard deduction is $35,500. In addition, from 2025 through 2028, taxpayers 65 and older can claim a separate $6,000 deduction each ($12,000 for a couple filing jointly), whether they itemize or not, which phases out at modified adjusted gross incomes above $75,000 (single) or $150,000 (joint).

Two other 2026 changes are worth knowing about. Taxpayers who itemize can now deduct charitable gifts only to the extent they exceed 0.5% of their adjusted gross income, and the tax value of itemized deductions is capped at 35% for those in the top 37% bracket. Meanwhile, those who take the standard deduction can deduct up to $1,000 (single) or $2,000 (married filing jointly) of cash gifts to charity. That new deduction is far smaller than the QCD limit, and a gift made through a QCD cannot also be deducted.

For many people who have their medical expenses covered with a good insurance plan, and who have little or no mortgage interest, their total itemized deductions might be nothing more than their state and local income and property taxes, say $10,000. For a single person over 65 like this who gets a standard deduction of $18,150, the first $8,150 they give to charity will thus provide them with no federal tax benefit since they still won't exceed their standard deduction, which they get simply by filing. For married folks who only have $10,000 in taxes as an itemized deduction, the first $25,500 of charitable giving will offer them no federal tax benefit since they still won't exceed their standard deduction.

If these taxpayers have reached RMD age (73, or 75 if born in 1960 or later) and have a retirement account, they must take Required Minimum Distributions from their retirement account. Tax law, however, allows them to make up to $111,000 in charitable contributions each year for 2026 (the limit is adjusted for inflation, and a married couple can give up to $222,000 if each spouse has their own IRA) directly from their IRA that will not be counted as income on their return. These Qualified Charitable Distributions (QCD's) will also not count as a charitable deduction on their return, but for many people like those in the examples above, they wouldn't get a full deduction anyway (and the new 0.5% floor trims itemized charitable deductions even further). So this offers them a tax-wise way to be charitable with dollars that have never been taxed.

Example Scenario: John & Susan Landcare

John and Susan Landcare are both 73 and are in the 32% marginal federal tax bracket. John has an IRA that he rolled over from his company 401(k) plan when he retired. John and Susan paid off their mortgage a while back, and they have excellent Medicare supplement plans to augment their Medicare benefits. Their combined state income tax and property tax is $15,000 per year, all of which is deductible under the 2026 cap of $40,400. John's Required Minimum Distribution (RMD) from his IRA for 2026 is $20,000. John and Susan would like to benefit the Cayucos Land Conservancy with a $15,000 charitable donation.

Standard Approach: If John takes his $20,000 IRA distribution and they then write a check to the CLC, they will have to claim the $20,000 in income and will have itemized deductions of $30,000: their $15,000 in taxes and their $15,000 charitable gift (before the new 0.5% floor reduces the gift's deduction even further). But since they get a standard deduction of $35,500 they will use the standard for federal tax purposes.

QCD Approach: John takes a $5,000 distribution from his IRA and then gifts the rest ($15,000) of his $20,000 Required Minimum Distribution from his retirement account directly to the CLC through a Qualified Charitable Distribution.

The Result: John & Susan now claim only $5,000 in income instead of $20,000, and they still take the same $35,500 standard deduction on their taxes. They've saved $4,800 in taxes ($15,000 X 32%) by using the QCD from John's IRA for their gift! With that savings, the Landcares can actually give the whole $20,000 RMD to CLC from John's IRA!

Important Rules & Guidelines

Keep in mind that a QCD must come directly from an IRA (money in a 401(k) or 403b would need to be rolled over to an IRA first) to the charity - it cannot be made out to the retiree and then signed over. It also cannot go to a donor-advised fund or a private foundation. Some custodians (like Charles Schwab) even offer check-writing now so that the account holder can write a check directly out of the retirement account to the charity! Of course, they need to have sufficient cash in the account when they write the check. And the check needs to be cashed by the charity before year-end for it to count as part of the IRA participant's RMD for that year. It's best to consult with your financial planner and/or tax advisor.

Take-home Point

Under current tax law, QCD's from IRAs can offer a significantly enhanced tax-advantaged method of philanthropy for people over 70½.