Can You Make a Qualified Charitable Distribution From an SDIRA?
Key Takeaways
Starting at 70½, a QCD sends IRA money to charity tax-free while counting toward your RMD requirement.
Even if you take the standard deduction, a QCD can still lower your taxable income.
If your SDIRA holds real estate or private notes, plan for the cash you’ll need well before December 31.
You don’t need this year’s RMD, and you didn’t ask for it. The IRS makes you take it anyway, then taxes it.
For many of my clients, their required minimum distribution (RMD) is money they don’t need, triggering taxes and stacking on top of Social Security.
RMDs can push them into higher tax brackets and increase Medicare premiums, and no one wants that. RMDs may feel like an administrative obligation rather than a predictable, planned income source.
Many people put off taking RMDs until the fourth quarter. That coincides with an influx of year-end checks to charities, alma maters, and houses of worship. For those taking the standard deduction, those checks produce little tax benefit.
A qualified charitable distribution (QCD) from your self-directed IRA addresses both by sending IRA funds directly to charity.
But if your self-directed IRA holds rental property or private notes, waiting until December can leave you without the liquidity to make the gift.
QCDs: From Forced Withdrawal to Tax-Free Gift
With a QCD, your IRA custodian sends money directly to an eligible charity. The amount doesn’t add to your adjusted gross income (AGI), and once you reach RMD age, it counts toward that year’s RMD.
Here are the core rules of QCD rules:
You must be at least 70½ on the day the money leaves your IRA.
The 2026 limit is $111,000 per person. A married couple with separate IRAs can give up to $222,000 combined.
The recipient must be a 501(c)(3) eligible to receive deductible gifts. Donor-advised funds, private foundations, and supporting organizations don’t qualify.
The money must move from your IRA directly to the charity. If the money passes through your hands first, the IRS treats it as a taxable distribution.
Which Retirement Accounts Can Make a QCD?
Traditional and Roth IRAs can make QCDs, but there’s no benefit to making them with a Roth, which has tax-free qualified withdrawals and no lifetime RMDs.
Solo 401(k)s, 401(k)s, and 403(b)s don’t qualify. You would need to roll funds into an IRA first, which takes time.
SEP and SIMPLE IRAs are ineligible while the employer is making contributions.
How 2026 Tax Changes Affect Charitable Giving
A QCD isn’t a charitable deduction, and you can’t claim it as one. Instead, you benefit because the gift doesn't count toward your income. The One Big Beautiful Bill Act has changed how charitable giving, particularly itemizing, works:
The standard deduction for married couples filing jointly is $32,200 (plus an extra $1,650 for each spouse 65 or older and an additional $6,000 senior deduction per person through 2028). Few retirees will itemize to exceed that.
Non-itemizers can now deduct up to $1,000 in cash gifts ($2,000 for joint filers).
Itemizers can deduct charitable gifts only above 0.5% of AGI, and those in the top tax bracket have itemized deductions capped at 35%.
With a QCD, you keep the standard deduction while lowering your AGI. That can help you hold on to the $6,000 senior deduction (which phases out above $150,000 modified AGI for joint filers). And because Medicare looks back two years, a QCD this December could lower the premiums you pay in 2028.
Making a QCD From an SDIRA Holding Alternative Assets
A QCD goes to the charity as cash. In a typical brokerage IRA, the custodian sells the right amount of fund shares to move that money. But in a self-directed IRA, the value may be in a rental property or private note.
Say your traditional SDIRA holds $1.2 million in rental property. At 74, your RMD is about $47,000. You decide you want $20,000 of it to go to your church. For a regular RMD, you could distribute a share of the property itself. But with a QCD, you don’t have that option.
If the account operating reserves hold $8,000 after property taxes and repairs, you won’t be able to make that QCD until you have more cash in the account.
Rental income can provide a natural source of cash for a QCD, provided you allow enough of it to accumulate inside the account.
Clients commonly build liquidity within their SDIRA by:
Leaving rent and note payments in the account through the year
Timing a note payoff, property sale, or fund distribution to close before December
Holding a liquid position alongside real assets
The route you take is a decision for you and your financial advisor.
Watch the order of withdrawals if your goal is to offset RMD taxes with a QCD. Say you have that $47,000 RMD, but you took the whole distribution in the summer. It stays taxable, even if you decide you want to make a $20,000 QCD later. The QCD needs to come first to reduce the taxable dollars from your RMD.
AI-driven planning tools can help calculate a QCD’s tax savings if you provide the right details, but you still need people for the judgment calls: which income to let build up as cash, how a note’s payment schedule lines up with December timing, and the role of a gift in your broader plan.
Don’t Wait Until December
Your QCD must leave the IRA by December 31 to count for 2026. At CTAS, we typically process QCD requests within a week. Increasing liquidity takes longer, and you need the full amount available in cash before you submit a request. After you make your QCD, your tax preparer will need the charity’s written acknowledgment stating the amount, date, and that you received nothing in return.
Most of the QCDs we handle are in the fourth and first quarters of the year. A first-quarter QCD comes before any other withdrawal, so it reduces the taxable share of that year’s RMD from the start. A December QCD gives you the longest runway to build cash, so long as you plan for it in advance.
How Chicago Trust Administration Services Can Help
At Chicago Trust Administration Services, we’re not financial advisors, so we won’t tell you which assets to hold or how to build liquidity. We confirm the cash is in place so your charitable distribution goes directly to the eligible charity of your choice, along with the proper documentation for your tax preparer.
If you’re planning a QCD before December 31, there are only a few weeks left. To see how we can help review your cash position and timeline, we invite you to schedule a complimentary meeting with us by calling 312-869-9394 or emailing steve@ctasira.com.
Frequently Asked Questions (FAQs)
Q: How do I report a QCD on my tax return?
A: Your custodian issues a Form 1099-R showing the full distribution. On Form 1040, your tax preparer reports the total, enters the taxable portion (zero if the whole amount was a QCD), and writes “QCD” beside it.
Q: I made deductible IRA contributions after age 70½. Does that affect my QCD?
A: Yes. The tax code reduces your tax-free QCD amount by the deductible contributions you made after 70½ so that you don’t benefit from a double tax break (deduction going in, tax-free going out as a QCD).
*The content and opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
**CTAS professionals are not financial advisors and cannot provide advice or recommendations regarding specific investment decisions.