QCDs: What Nonprofits Need to Know

Qualified Charitable Distributions (QCDs) have become an increasingly important source of giving for many nonprofits, especially those with older donor bases.  Yet many nonprofit leaders are unfamiliar with how QCDs work, which organizations can receive them, and what recent law changes mean for charitable giving. 

Understanding the basics can help nonprofits identify opportunities, communicate effectively with donors, and avoid common misunderstandings. 

What Is a Qualified Charitable Distribution? 

A Qualified Charitable Distribution (QCD) allows individuals age 70½ or older to transfer funds directly from their Individual Retirement Account (IRA) to a qualified charitable organization.  The distribution is excluded from the donor’s taxable income, which can make it a tax-efficient way to give. 

For the gift to qualify: 

• The funds must be transferred directly from the IRA custodian to the charity. 

• The donor cannot receive the funds first and then donate them. 

• The donor must be at least age 70½ at the time of the transfer. 

QCDs can also count toward a donor’s Required Minimum Distribution (RMD), which often makes them attractive for retirees who already planned to withdraw funds from their IRA. 

The amount donors can give through QCDs is indexed for inflation.  For 2026, the limit is $111,000 per taxpayer.  Married couples can potentially give $222,000 combined if each spouse has their own IRA.  This makes QCDs a meaningful potential source of funding for nonprofits with aging donor bases. 

Which Nonprofits Can Receive QCDs? 

Most nonprofits that operate as public charities can receive QCD gifts. 

Examples include: 

• Religious organizations 

• Educational institutions 

• Community nonprofits 

• Healthcare charities 

• Other publicly supported 501(c)(3) organizations 

For most operating nonprofits, receiving a QCD is the same as receiving any other charitable gift except the funds come directly from an IRA custodian. 

Which Organizations Cannot Receive QCDs? 

Certain types of charitable entities are not eligible recipients of QCDs. These include: 

• Donor-advised funds (DAFs) 

• Private foundations 

• Supporting organizations described under IRC §509(a)(3) 

The tax code requires QCDs to go directly to an operating charity, rather than through an intermediary philanthropic vehicle.  This rule often surprises donors who regularly give through donor advised funds. 

Other Key Restrictions Nonprofits Should Know 

Several additional rules affect QCD gifts.   

• No goods or services can be provided in exchange.  If a donor receives event tickets, meals, or other benefits, the distribution will not qualify as a QCD. 

• QCDs generally come from traditional IRAs.  They cannot be made directly from employer retirement plans such as 401(k)s, 403(b)s, or Thrift Savings Plans. 

• Active SEP or SIMPLE IRAs may not qualify.  If employer contributions are still being made, those plans typically cannot be used for QCDs. 

Why QCDs Matter for Nonprofits 

QCDs remain attractive because they provide tax benefits even when donors do not itemize deductions.  Instead of claiming a charitable deduction, the donor simply excludes the distribution from income, which can reduce taxable income, lower Medicare premium thresholds, and reduce taxation of Social Security benefits.  For retirees managing required minimum distributions, QCDs are often one of the most tax-efficient ways to give. 

The Current Debate: Should QCDs Be Allowed to Fund Donor-Advised Funds? 

One of the ongoing policy discussions in the nonprofit sector is whether QCDs should be allowed to fund donor advised funds (DAFs). 

Under current law, this is not allowed.  QCDs must go directly from the IRA to a qualified charity and cannot be transferred into a DAF account.  However, some philanthropic organizations and community foundations have argued that the rule should be reconsidered. 

Supporters of changing the rule argue that allowing QCDs to fund DAFs would: 

• Allow donors to make one IRA distribution and support multiple charities later 

• Simplify giving for retirees who support several nonprofits 

• Reduce administrative burdens associated with initiating multiple QCD transfers from IRA custodians  

For example, a donor who wants to give $20,000 to ten different nonprofits may have to initiate ten separate IRA transfers.  Supporters argue that allowing the funds to first go into a DAF would simplify the process. 

Others in the nonprofit and policy communities oppose the idea, arguing that: 

• Funds placed in donor-advised funds may sit invested for years before reaching operating charities 

• QCDs were originally designed to move retirement funds directly into charitable work 

Because of these concerns, Congress has not changed the rule, and QCDs still cannot be directed to donor advised funds. 

What Nonprofits Should Do 

Nonprofits do not need to become tax experts, but understanding QCDs can help organizations better engage older donors. 

Helpful steps include: 

• Educating development staff about IRA giving options 

• Mentioning QCDs in donor communications to older supporters 

• Ensuring gift acknowledgments confirm that no goods or services were provided 

• Making sure the organization qualifies as a public charity eligible to receive QCDs 

As the population ages and tax rules evolve, QCDs are likely to remain an important part of charitable giving strategies.  For nonprofits with mature donor bases, understanding QCDs is not just helpful, it can be an important part of long-term fundraising strategy.