A bipartisan bill in Congress could give retirees more flexibility in how they donate from their retirement accounts. Tax experts also say timing matters, according to a report by CNBC.
How QCDs Work Today
Under current law, Americans aged 70½ or older can make a qualified charitable distribution, or QCD, a direct transfer from an IRA to an eligible nonprofit. The amount is excluded from taxable income and counts toward required minimum distributions (RMDs), which start at age 73. The 2026 annual limit is $111,000 per individual.
Bill Would Expand Giving Options
The Senate bill, introduced March 3 as a companion to a House measure, would allow QCDs to flow into donor-advised funds (DAFs), which are charitable accounts managed by nonprofits where donors get an up-front tax deduction and can recommend grants over time.
Why QCDs Offer Strong Tax Advantages
Tax attorney Richard Fox said a QCD is “almost always the superior tax move compared to a cash donation.” Because QCDs are excluded from income, they deliver a full 37% marginal tax benefit. Cash donations above $1,000 ($2,000 for joint filers) get no tax benefit for standard deduction filers. QCDs also prevent RMD income from pushing retirees into higher tax brackets, which can raise Medicare premiums.
The tax advantage is especially relevant this season. Average refunds are running 10.9% higher in 2026 at roughly $2,290, according to IRS data, partly reflecting deduction changes under the One Big Beautiful Bill Act. For retirees navigating a shifting tax landscape, structuring charitable giving through a QCD rather than cash donations could meaningfully reduce their tax burden.
Concerns Over Delayed Donations
Fox noted that DAFs face no minimum distribution requirement. “The money may stay there for years,” he said. Total DAF assets reached $326.45 billion in 2024, up 27.5% from 2023. Critics worry this could encourage wealth hoarding.
Experts Say Flexibility Could Help
Michael Kenyon, president of the National Association of Charitable Gift Planners, backed the bill, saying it “honors how donors want to give.” The Senate measure is with the Finance Committee; the House bill sits in Ways and Means.
The Federal Reserve kept rates unchanged for the third consecutive meeting last week, with updated projections pointing to just one cut in 2026 and headline inflation revised up to 2.7%. Prediction markets place a 34% probability on zero cuts this year. For retirees relying on fixed income, that environment makes tax-efficient strategies like QCDs even more valuable.
Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.
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