Houston Estate Planning and Elder Law Attorney Blog
A retiree who gives to a church, a university, or a local charity by writing a check is using after-tax dollars and then hoping the deduction survives the return. There is a different route for anyone who has reached 70½ and holds an individual retirement account. The money can go straight from the IRA to the charity, and it never appears in taxable income at all.
That route is the qualified charitable distribution. For a Texas retiree who takes the standard deduction, a QCD is often worth more than the same gift made by check, because the tax benefit does not depend on itemizing. It became more valuable for the 2026 tax year, when a new floor started limiting charitable deductions that a QCD sidesteps entirely. McCulloch & Miller advises Dallas and Houston families on charitable planning, and this is the tool that fits the largest number of ordinary retirees.
How a Qualified Charitable Distribution Works in Texas
A qualified charitable distribution is a payment made directly by an IRA trustee to a qualifying charity on behalf of an account owner who has reached age 70½, excluded from the owner’s gross income up to an annual cap. The definition sits in 26 U.S.C. § 408(d)(8).
Two mechanics do the work. First, the transfer has to be made directly by the trustee under § 408(d)(8)(B)(i). A distribution paid to the account owner who then writes a check to the charity is an ordinary taxable distribution, and the sequence cannot be repaired afterward. Second, § 408(d)(8)(D) turns off the usual proportional rule for IRAs with after-tax money in them, so the QCD is treated as coming from the pre-tax portion first.
The annual cap is indexed. Section 408(d)(8)(G) increases the dollar amounts printed in the statute for tax years beginning after 2023, using the cost-of-living adjustment and rounding to the nearest $1,000, which means the figure in the statutory text is a stale baseline rather than the current limit. Confirm the current year’s number with the IRS or a tax advisor before planning around a specific amount.
Why the New 0.5 Percent Floor Makes the QCD Sharper
Congress added 26 U.S.C. § 170(b)(1)(I) in July 2025, and it applies to taxable years beginning after December 31, 2025. For individuals, a charitable contribution is now deductible only to the extent the year’s aggregate contributions exceed 0.5 percent of the taxpayer’s contribution base. Gifts below that floor produce no deduction.
A QCD is untouched by the floor, and the reason is structural rather than incidental. Section 408(d)(8)(E) provides that qualified charitable distributions excluded from income are not taken into account in determining the deduction under § 170. A QCD is not a charitable deduction at all. It is an exclusion from income, so it never enters the calculation the floor applies to.
The practical result is that a retiree who gives a moderate amount each year, and who would now lose part of that deduction to the floor, may keep the full tax benefit by routing the gift through the IRA instead. The same is true for the much larger group of retirees who take the standard deduction and were getting no charitable deduction to begin with.
The Age Threshold Is 70½ and It Did Not Move
This is the most common error on the topic. Recent legislation raised the age at which required minimum distributions begin, and many retirees assume the QCD age moved with it. It did not. Section 408(d)(8)(B)(ii) still requires the distribution to be made on or after the date the individual attained age 70½.
The gap between the two ages is useful rather than merely technical. A retiree who is past 70½ but not yet required to take distributions can make QCDs in those intervening years, reducing the account balance before required distributions start. Once required distributions do begin, a QCD can satisfy some or all of that year’s requirement while keeping the amount out of income.
Where the Money Can and Cannot Go
Section 408(d)(8)(B)(i) allows the transfer to an organization described in § 170(b)(1)(A), which covers churches, schools, hospitals, and most public charities. It then carves two recipients out expressly.
- Donor advised funds: a fund or account described in § 4966(d)(2) cannot receive a QCD, which surprises donors who have consolidated their giving into one.
- Supporting organizations: an organization described in § 509(a)(3) is likewise excluded.
Section 408(d)(8)(C) adds a further condition. The distribution counts only if a deduction for the entire amount would have been allowable under § 170, determined without regard to the percentage limits. Anything flowing back to the donor breaks that, so a gift that buys gala tickets, a table, or any other benefit does not qualify.
There is also a one-time option under § 408(d)(8)(F) to direct a QCD into a charitable remainder trust or a charitable gift annuity funded exclusively by qualified charitable distributions, subject to its own indexed cap and a restriction limiting the income interest to the donor, the donor’s spouse, or both.
Two Rules That Quietly Reduce the Benefit
The first is a trap for retirees still working. Under § 408(d)(8)(A), the excludable amount is reduced by the aggregate deductions taken under § 219 for all tax years ending on or after the year the taxpayer reached 70½. A retiree with earned income who keeps making deductible IRA contributions after 70½ is eroding their own future QCD exclusion, dollar for dollar.
The second is simpler. Section 408(d)(8)(E) bars a § 170 deduction for the excluded amount, so the gift cannot be both left out of income and deducted. A charity’s year-end acknowledgment letter often looks identical for a QCD and a check, and reporting the QCD as a deduction is an easy mistake at tax time.
McCulloch & Miller works with retirees across Texas on estate planning that accounts for tax treatment alongside the plan itself, which is the point of having an attorney who is also a CPA look at the giving strategy and the IRA together.
Questions Texas Retirees Ask About QCDs
Can a QCD Satisfy a Required Minimum Distribution?
A qualified charitable distribution can count toward the year’s required minimum distribution while staying out of taxable income, provided it meets the § 408(d)(8) requirements and is made in the same tax year. A distribution already taken cannot be converted into a QCD afterward, so the sequence has to be right the first time.
Does a QCD Work From a 401(k)?
Section 408(d)(8)(B) describes distributions from an individual retirement plan, and excludes plans described in § 408(k) and § 408(p). An employer plan is a different vehicle, and a retiree who wants to give this way generally needs the funds in an IRA first. Whether a rollover makes sense depends on the rest of the picture.
Does Texas Tax the Distribution?
Texas imposes no state individual income tax, so the benefit of a QCD for a Texas resident is federal. That does not make the strategy less useful, because the exclusion also keeps the amount out of adjusted gross income, which can affect Medicare premium surcharges and the taxation of Social Security benefits.
Planning a Charitable Gift From an IRA
The difference between a QCD and a check is entirely in the paperwork and the sequence, and both have to be right before the money moves. McCulloch & Miller helps families in Dallas, Houston, and across Texas structure charitable giving so the tax treatment matches the intent. To review a giving plan alongside your estate plan, contact McCulloch & Miller or call (713) 333-8900. Flat fees are available for many planning matters.