If you’ve heard of a Qualified Charitable Distribution (QCD) but aren’t quite sure how it works – or whether it makes sense for you – you’re not alone. Many donors begin exploring QCDs when they reach a certain age and start taking required minimum distributions from their IRAs and notice the impact on their taxable income.
At Lincoln Community Foundation, we often meet thoughtful individuals who want to make sure their giving reflects both their financial realities and their deepest values. If you’re already planning to support the causes you love, a QCD can sometimes be a powerful way to do just that.
Take Margaret’s story for example.
A Surprise at Tax Time
Margaret, a 74-year-old widow and longtime philanthropist, scheduled a meeting early in the year to talk with us about her charitable plans. She had recently begun taking required minimum distributions (RMDs) from her IRA - and was surprised to see her taxable income climb higher than she expected or needed.
Margaret has always been intentional about her giving. Several years ago, she established a donor advised fund (DAF) at LCF to organize support for the many organizations she cares about. She loves the flexibility it provides and values staying connected to the community through Foundation events and learning opportunities.
But now she found herself wondering: Was there a smarter way to give?
“If I’m Going to Give Anyway…”
“I’ve been reading about Qualified Charitable Distributions,” Margaret said. “If I’m going to give to charity anyway, I’d love to know whether using a QCD makes sense for me – especially if I want my gift connected to the Foundation.”
It was a thoughtful question.
A Qualified Charitable Distribution allows individuals age 70½ or older to transfer funds directly from an IRA to a qualified charity without including that amount in taxable income. After age 73, when required minimum distributions begin, a QCD can satisfy all or part of that RMD while keeping adjusted gross income lower.
That can potentially reduce Medicare premiums, lessen taxation of Social Security benefits, and improve overall tax efficiency. With the annual QCD limit adjusted for inflation to $111,000 in 2026, it’s an increasingly relevant strategy for many donors.
Margaret was encouraged. This felt like a practical solution.
Then she asked the natural next question.
A Complication – and an Opportunity
“Since I already have a DAF at LCF, can I simply direct my QCD into that fund?”
Under current IRS rules, QCDs cannot be directed to DAFs – even those at community foundations –because DAFs allow a donor to retain advisory privileges over future grantmaking, they are excluded from QCD eligibility.
Margaret frowned slightly. She appreciates her DAF because it gives her flexibility and allows her to support multiple causes over time.
“That’s disappointing,” she admitted.
And that feeling is completely understandable.
But the conversation didn’t end there.
Finding the Right Fit
The good news is that other types of funds at LCF do qualify to receive QCDs – and can still reflect a donor’s values and priorities.
Margaret learned she could direct her QCD to:
- A designated fund supporting specific nonprofits she already knows she wants to help.
- A field-of-interest fund focused on causes she cares deeply about, such as education, health or the arts.
- A Lincoln Forever fund that allows the Foundation to respond to emerging community needs.
Because these funds are fully managed by LCF – without ongoing advisory privileges – they meet IRS requirements for QCD eligibility while still honoring a donor’s charitable intent.
Margaret paused to think.
“I don’t want this decision to be driven only by taxes,” she said. “I want it to feel meaningful.”
Turning an Obligation into a Meaningful Gift
Together, Margaret, her financial advisor and LCF’s Philanthropy Services team talked through her goals. They reviewed her IRA custodian’s requirements to ensure the distribution would be handled properly. They discussed which type of fund would best reflect the causes she cares about most.
By the end of the process, Margaret had a clear plan.
Her required minimum distribution would directly support the community she loves. She would reduce her taxable income. And she would create a charitable structure that felt aligned with her values - not just her balance sheet.
Most importantly, she didn’t have to navigate the rules alone.
What began as a confusing tax question became something much more powerful: an opportunity to transform a required distribution into lasting community impact.
You Don’t Have to Figure This Out Alone
If Margaret’s story feels familiar, you’re not alone. Many donors are thoughtfully balancing required minimum distributions with a desire to give generously and wisely.
A Qualified Charitable Distribution can be one way to turn a tax obligation into a meaningful investment in the community.
LCF's Philanthropy Services team is here to walk alongside you and your professional advisors. Whether you already have a donor advised fund or are considering a different type of charitable fund, we can help you explore options that align with both your financial goals and your heart for our community.
Charitable planning doesn’t have to feel complicated. With the right guidance, even complex tax rules can become opportunities for generosity and impact.
If you’re considering a QCD or would simply like to explore what’s possible, we welcome the conversation!
Pro Tip
Tax laws do evolve - sometimes in helpful ways. A small bipartisan proposal has been introduced that would allow Qualified Charitable Distributions to donor advised funds in the future. While current rules still prohibit that approach, we remain hopeful and will continue to keep our donors informed of any changes.
