How a QCD can take the burden off your RMD (Required Minimum Distributions)

For retirees, turning 73 may also come with an unexpected tax problem.

After decades of saving diligently in tax-deferred retirement accounts, the IRS requires that you begin withdrawing money each year through Required Minimum Distributions (RMDs). While these withdrawals are intended to ensure retirement accounts are eventually taxed, they may create an unintended consequence for affluent retirees: a sudden increase in taxable income.

For retirees with IRA balances of $2 million or more, RMDs can easily exceed $80,000–$150,000 per year, depending on age and market performance. That additional income can push retirees into higher tax brackets and trigger a variety of secondary tax consequences, phaseouts and more including:

• Higher Medicare IRMAA premiums
• Increased taxation of Social Security benefits
• Greater exposure to the 3.8% Net Investment Income Tax
• Reduced eligibility for certain deductions and credits

In other words, what was once tax-deferred wealth accumulation can suddenly become tax-accelerated income.

However, there is a strategy many retirees overlook that can dramatically improve the tax efficiency of RMDs, the Qualified Charitable Distribution (QCD). For retirees who are already charitably inclined, this strategy can allow them to satisfy their RMD while reducing taxable income at the same time by shifting their giving from low basis stock or cash gifts.

Your RMD is calculated by dividing the prior year-end account balance by a life expectancy factor determined by the IRS. The longer you live, the lower your life expectancy and therefore the higher the distribution percentage.

Here is an example of how your first year RMD’s may impact you:

12/31/prior year balance	Age 73 RMD Factor	Approximate Distribution
$1,000,000	26.5 (approx. 3.77%)	$37,735
$2,000,000	26.5 (approx. 3.77%)	$75,470
$3,000,000	26.5 (approx. 3.77%)	$113,200

These distributions are treated as ordinary taxable income.

For retirees who have done an excellent job saving, this can produce an ironic outcome: retirement income that is larger and more taxable than is needed or expected.

A retiree with

• $95,000 Social Security income (married couple)
• $90,000 IRA RMD
• $40,000 capital gains, dividends and interest income from cash savings

would generate approximately $225,000 of total income.

That level of income would trigger Medicare IRMAA surcharges, raising Medicare premiums and causing additional expenses that may not have been factored into a financial plan. Medicare premiums increase when income crosses certain thresholds.

For married couples filing jointly in 2026, IRMAA thresholds are expected to be approximately:

Income:	Monthly Part B Premium:
Below $218,000	$203 each
$218k – $274k	$284 each
$274k – $342k	$406 each
$342k – $410k	$527 each
$410k – $750k	$649 each

These increases apply per person, meaning a couple can easily pay $2,000–$15,000 more per year in Medicare premiums simply because their taxable income increased.

For those who are charitably inclined, there is a way to give more efficiently as we age. A Qualified Charitable Distribution (QCD) allows IRA owners once they reach age 70½ or older to donate directly from their IRA to a qualified charity. In 2026, retirees can donate up to $111,000 per year through a QCD.

The key advantage to this is that the distribution counts toward the annual RMD requirement but is NOT included in taxable income.  This distinction can be incredibly powerful. The QCD eligibility kicks in at 70 ½ because that was the original age for RMDs.  The RMD age has gone up, but the government still gives allows you to distribute without counting the distribution in your taxable income even before RMDs kick in at 73.

Because the distribution never appears in Adjusted Gross Income (AGI), it can reduce the likelihood of triggering:

• Higher Medicare premiums
• Increased Social Security taxation
• Net Investment Income Tax exposure
• Phase-outs of deductions and credits

For retirees who already give to charity, this can be a significantly more tax-efficient way to donate.

Finally, how do QCDs compare to Itemized Deductions

Prior to the Tax Cuts and Jobs Act, charitable donations were commonly deducted through itemized deductions. Today, however, many retirees take the standard deduction, which for 2026 is expected to exceed $32,000 for married couples over age 65.

This means charitable donations often provide no real tax benefit. In this scenario, without mortgage interest and minimal State and Local income tax to deduct, this could mean that charitable deductions as high as $20,000 or $25,000 may receive no deduction.

A QCD solves this problem. The donation is excluded from income rather than deducted, retirees effectively make the gift with pre-tax dollars. For high-income retirees, this can be far more powerful than a traditional deduction.

Lastly, Important Rules to consider when making Qualified Charitable Distributions

To ensure the strategy works properly, several rules must be followed.

1. The distribution must go directly from the IRA to the charity.
   The funds cannot pass through the account holder first.
2. The charity must be a qualified 501(c)(3) organization.
3. Donor-advised funds and private foundations are not eligible.
4. The IRA owner must be age 70½ or older.
5. The annual limit for QCDs is $111,000 per individual in 2026.

If handled incorrectly, the distribution may become fully taxable, so careful execution is important.

So when the question comes up, where should I put my RMD?

The more strategic question is: “How can I take my RMD in the most tax-efficient way possible that is in line with my greater wealth management goals?” For retirees who value thoughtful planning and charitable giving, the Qualified Charitable Distribution may be one of the most powerful, and underutilized strategies available.