You Ask and We Answer: DAFs and QCDs
If you want your charitable giving to be more intentional while staying mindful of taxes, there are a few options to consider. Two of the more popular ones are using donor advised funds (DAFs) and qualified charitable distributions (QCDs). In Part 1 of our series on charitable giving strategies, we provided some things to consider when Choosing Between a DAF and QCD. Below, in Part 2 of this series, we answer frequently asked DAF and QCD questions:
What is the age requirement to use a QCD?
The QCD eligibility age is 70.5. Despite legislation increasing the age that IRA required minimum distributions (RMDs) must begin to age 72 (73 if you reach age 72 after Dec. 31, 2022), the QCD eligibility age remains 70.5. This mismatch means QCDs can be used before RMDs begin if the situation makes practical and strategic sense.
How much can I gift using a Qualified Charitable Distribution?
For 2026, the limit is $111,000 per person annually. This is true even if your IRA RMD is below $111,000. A married couple could transfer $111,000 from each respective IRA for $222,000 total, provided each person meets the age requirement.
How much can I gift using a Donor Advised Fund?
There is no statutory limit, but the amount that may be tax deductible could be restricted. The deductible value of charitable gifts in a given year typically falls between 20% and 60% of the donor’s adjusted gross income (AGI). If a limitation applies to a gift of cash or securities, it may be possible to carry forward tax-benefits to a future year. AGI limits do not apply to QCDs.
If I use a QCD for an amount more than my IRA RMD this year, can the excess reduce my RMD next year?
No. A QCD that exceeds your IRA RMD cannot be carried over or used to meet the minimum distribution for future years. However, the QCD reduces the balance in the IRA, which effectively lowers future required distributions.
Can I send a QCD to a DAF?
No. You cannot send a QCD to a DAF or a private foundation. Rules starting in 2023 opened a new opportunity to use a QCD to fund a charitable remainder trust or charitable gift annuity.
DAFs and QCDs can both support thoughtful, tax-aware giving, but the right approach depends on your goals and circumstances. Reviewing your options with a financial advisor and tax advisor can help you align your strategy with your overall plan.
This material is for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. Tax laws, contribution limits, and eligibility rules are subject to change. Individuals should consult their financial, tax, and legal advisors regarding their specific circumstances before implementing any charitable giving strategy.