You're already worried about how high your 2026 tax bill will be, and you still haven't taken your required minimum distributions (RMDs) for the year. These could increase your tax liability by thousands of dollars, but skipping these withdrawals triggers a 25% penalty that'll likely cost you even more.
It might seem like you have no way out, but there actually is a way to satisfy your RMD without costing yourself a boatload in taxes. Here's what you need to do.
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How a qualified charitable distribution (QCD) can help you avoid your RMDs
The IRS offers only one way out of 401(k) or IRA RMDs -- a qualified charitable distribution (QCD). This is where you donate your RMD to a qualifying charitable organization rather than keeping it for yourself. If you do this, you'll still lose the same amount from your retirement account, but the IRS won't tax you on the charitable gift.
The catch is, you can't withdraw the funds yourself and give them to the charity, or it won't count as a QCD. You must tell your plan administrator which organization you want to donate to. Then it will either transfer the funds for you or cut you a check in the organization's name, which you can then mail or hand over.
There's a $111,000 limit on QCDs in 2026, which should be more than enough for most people. You don't have to donate it all to a single organization, either. Feel free to spread the money around if you have multiple charities you'd like to give to.
You can further reduce your RMDs by not taking them from exempt accounts. You don't have to take RMDs from Roth accounts, and you also don't have to take them from your current 401(k) if you're still working and own less than 5% of the company you work for.
It's not too early to start planning your 2026 QCDs
You have until Dec. 31, 2026, to complete your RMDs, or April 1, 2027, if you'll be 73 by the end of this year. But it doesn't hurt to start planning well in advance.
Start by calculating your RMDs for the year. You can do this by dividing your account balance from Dec. 31, 2025, by the applicable denominator for your age from the IRS's Uniform Lifetime Table. For example, if you have a $500,000 account balance and you're turning 74, you'd divide $500,000 by the 25.5 applicable denominator for 74-year-olds to get an RMD of $19,608.
Then consider which organization(s) you'd like to donate to, and decide when to schedule those transactions. It's best not to wait until the last few weeks of the year, as processing your QCDs can take time.
