By Kim Alvarez, Vice President – Philanthropy, The Foundation for Enhancing Communities
You’ve no doubt noticed that Qualified Charitable Distributions (“QCDs”) continue to gain traction as one of the most practical and effective charitable planning tools for clients over age 70 ½. By allowing eligible clients to transfer funds directly from an IRA to a qualified charity without recognizing the distribution as taxable income, QCDs can help reduce adjusted gross income while supporting charitable priorities. For many clients, especially those who do not itemize deductions, a QCD is particularly appealing.
New and Proposed Changes
In recent years, Congress has expanded planning opportunities by indexing annual giving limits for inflation ($111,000 per person in 2026) and allowing certain one-time QCDs (“Legacy IRAs”) to fund charitable gift annuities and charitable remainder trusts. And now, proposed legislation known as the “Charity Parity Act” would, if enacted, extend QCD treatment beyond IRAs to include employer-sponsored retirement plans such as 401(k)s, 403(b)s, and 457(b)s. This potential change in the law would remove the extra step of rolling assets into an IRA before making a charitable gift, simplifying the process for many donors whose retirement savings remain primarily in workplace plans.
A Common Scenario
Consider a typical client scenario. Your client, age 74, is taking Required Minimum Distributions (“RMDs”) from a traditional IRA. Because the client claims the standard deduction, charitable gifts do not generate additional tax savings. By instead directing a portion of the RMD to a qualified charity as a QCD, the client can satisfy part or all of the RMD obligation without increasing taxable income. In many cases, this can also help reduce Medicare premium surcharges and lessen the taxation of Social Security benefits, creating planning advantages beyond the charitable deduction itself.
How Can We Help?
Here are three examples of how TFEC can help your client achieve charitable goals through QCDs:
- A client directs a QCD from an IRA to one of The Foundation for Enhancing Communities’ (TFEC) unrestricted funds to support broad community needs. The client satisfies part or all of the client’s annual RMD requirements while supporting flexible grantmaking that addresses changing priorities in the region.
- A client uses a QCD to contribute to an area-of-interest fund at TFEC, focused on causes such as animal welfare, arts and culture, community equity, early education, environmental stewardship, health and human services, HIV/AIDS and substance abuse, youth development and more. This allows the client to support a specific area of passion while relying on our expertise to identify effective nonprofit organizations over time.
- A client makes a QCD to an existing agency or scholarship fund held at TFEC. For example, the client may support a favorite local nonprofit through a designated fund or help students pursue higher education through an endowed scholarship fund, all while reducing taxable income through a QCD.
IRA Beneficiary Designations
Charitable giving with IRAs goes beyond current gifts to charity. When advising clients about their IRAs, be sure to review beneficiary designations.
Naming a fund at TFEC or another public charity as the beneficiary of an IRA can be tax advantageous. It is also a best practice that can help avoid future complications. Retirement plan beneficiary designations continue to show up in cautionary tales, especially when they are outdated, incomplete or inconsistent with the client’s broader estate plan.
A Planning Conversation Worth Revisiting
For attorneys, CPAs, estate planners and financial advisors, developments related to QCDs are worth watching closely. QCDs increasingly serve as a natural connector among retirement planning, philanthropy and legacy conversations.
Just as importantly, QCD discussions often open the door to broader planning opportunities, helping clients align financial goals with the causes and communities they care about most.
The Philanthropy Team at TFEC is ready to assist you as you work with your clients. Email philanthropy@tfec.org or call 717-236-5040.
