Retirement plans and charitable giving

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 nonprofit 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.

What’s especially notable is that 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.

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.

Here are four examples of how the Idaho Community Foundation (ICF) can help your client achieve charitable goals through QCDs:

• A client directs a QCD from an IRA to our Forever Idaho fund to support broad community needs. The client satisfies part or all of their annual RMD requirements while supporting flexible grantmaking that addresses changing priorities in Idaho.
  
  
• A client uses a QCD to contribute to a regional affiliate at ICF focused on causes closest to home. This allows the client to support a specific community they care about while relying on local expertise to identify effective nonprofit organizations over time.
  
  
• A client makes a QCD to an existing designated fund or scholarship fund held at ICF. 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.
  
  
• A client creates a new designated fund to be supported by their QCD. This direction gives the client more opportunities to customize overall impact of their charitable dollars. Reach out to our Philanthropic Advisor team to learn more on starting a new fund: philadvisors@idahocf.org

Keep in mind that charitable giving with IRAs goes beyond current gifts to charity! As part of advising clients about their IRAs, be sure to check their beneficiary designations. Not only is it tax advantageous for a client to name a fund at ICF or other nonprofits as a beneficiary of an IRA, but it’s also a best practice to avoid problems in the future. (Retirement plan beneficiary designations continue to show up in cautionary tales)

For attorneys, CPAs, 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. As always, please reach out to our team anytime!