The Charitable Gift That Also Lowers Your 2028 Medicare Premium

If you are 70½ or older and you give to charity, the money should come out of your IRA rather than your checking account, and it has to be out before December 31. In practice that means leaving your custodian by about the middle of November.

The order matters too. A gift from your IRA only counts against this year's required minimum distribution if it goes out before the RMD does.

Done this way, the gift also lowers your adjusted gross income, which a written check never does. Your 2026 adjusted gross income is the number Medicare will read to set your 2028 premium.

What a qualified charitable distribution actually is

A qualified charitable distribution, or QCD, moves money from your traditional IRA straight to a charity without passing through your hands. It never appears in your income, and you do not deduct it, because there is nothing to deduct.

You can do this starting at age 70½. Not the year you turn 70½, the actual date. The 2026 limit is $111,000 per person, so a couple who both qualify and both hold IRAs can move $222,000, though each half has to leave that spouse's own account.

RMDs do not begin until 73 for anyone born between 1951 and 1959. Giving from the IRA in the years before that shrinks the balance your first RMD is calculated against, which reduces every RMD after it.

Lowering your AGI does more than cut the tax bill. AGI also decides how much of your Social Security is taxable.

The ordering rule that catches people

The first money out of your IRA in a calendar year is treated as your required minimum distribution. That cannot be applied retroactively.

So if your RMD is $30,000 and you take it in cash in February, the RMD is finished. A $20,000 QCD in November is still excluded from your income, but it no longer counts toward the requirement. You have moved $50,000 out of the IRA in a year that required $30,000, and $30,000 of it is taxable.

Reverse the order and the QCD satisfies $20,000 of the obligation. You take the remaining $10,000 in cash later in the year, $30,000 leaves the IRA, and only $10,000 of it is taxable.

The charity receives the same $20,000 either way. The order of the two withdrawals is what puts $20,000 of extra income on your return.

What that is worth in dollars

Take a couple, both 74 and retired, with $245,000 of income this year from a pension, Social Security, and IRA distributions. They give $20,000 a year to their church and have done so for a long time.

If they give it from a checking account, their income stays at $245,000. Their deductions are the $32,200 standard deduction, $1,650 each for being over 65, and a senior bonus deduction that started at $6,000 per person and gets clawed back above $150,000 of income. At $245,000 that clawback runs 6% per person, so 12% combined, leaving $600 of the original $12,000. Total deductions $36,100, taxable income $208,900.

If they give the same $20,000 as a QCD, their income is $225,000 instead. The senior deduction claws back less, so it comes back up to $3,000. Total deductions $38,500, taxable income $186,500.

Taxable income falls by $22,400 on a $20,000 gift, because the vanishing senior deduction runs in reverse when income goes down. At the 22% rate that is $4,928 of federal tax, and Arizona's flat 2.5% adds another $500. The same gift to the same church in the same year is worth $5,428 more one way than the other.

There is one offset. From 2026 a married couple who do not itemize can deduct $2,000 of cash gifts, and a QCD does not qualify, so they give up about $440. Call the real difference $4,988.

The 2028 Medicare premium

Medicare uses a two-year lookback. What you pay in 2028 is set by the income on your 2026 return, and the figure it reads is your AGI. A QCD lowers that number. A charitable deduction never touches it.

For 2026 the first surcharge tier starts at $218,000 for a married couple, against a standard Part B premium of $202.90 a month. A couple inside that first tier pays $284.10 each instead, which together with the Part D surcharge comes to roughly $1,148 per person for the year, or about $2,300 for the two of them.

The 2028 thresholds have not been published and will not be until late 2027. Current projections put the first tier somewhere around $228,000 to $232,000 for a couple, but treat that as an estimate rather than a number to plan against precisely.

The couple above sits at $245,000 before the gift and $225,000 after it. On those projections the QCD moves them under the first tier, and the same $20,000 written from checking does not, because a deduction never reaches AGI. The surcharge is not prorated. Crossing by a single dollar raises the premium for both spouses for all twelve months.

What changed in January

For most retired couples a written check has produced no tax benefit for years, because the standard deduction beats anything they could itemize. January made that worse.

Charitable deductions now carry a floor. If you itemize, you can only deduct contributions above 0.5% of your income, which erases the first $1,225 of the couple's gift. Count the remaining $18,775 alongside $6,000 of Arizona property and state taxes and their itemized total is $24,775, well under the $35,500 they get for itemizing nothing. The gift produces no deduction beyond the $2,000 available to non-itemizers.

A QCD is not a deduction, so the floor does not apply and whether you itemize is irrelevant.

The mid-November part

The distribution has to be complete in 2026 to count for 2026, and most custodians treat a QCD paid by check as complete when the check clears your IRA, not when you requested it and not when it was mailed. Some custodians use the issue date instead. Ask yours which rule it applies and do not assume the answer you would prefer.

That is why the working deadline is the middle of November. A request placed in early December has to be processed, mailed, delivered, opened by a charity handling its heaviest mail of the year, and deposited, all before the 31st. Small churches and local nonprofits sit on checks through the holidays, and a check mailed December 20 and deposited January 8 is a 2027 distribution.

That is also how a missed RMD happens. If the QCD was the only distribution you planned and it lands in January, your $30,000 RMD went unsatisfied. The penalty is a 25% excise tax on the shortfall, reduced to 10% if corrected promptly, so $7,500 on top of the tax bill you were trying to reduce.

If your custodian can send the money electronically to the charity, use that instead. That removes the mail, and with it the question of which date counts.

Three ways a QCD goes wrong

It has to come from an IRA. A 401(k) does not qualify. If your money is in a plan, it has to be rolled to an IRA first, and if you are already subject to RMDs, the plan's RMD has to come out before the rollover.

The charity has to be an operating public charity, and it has to write you a letter. Donor-advised funds do not qualify, and neither do private foundations or supporting organizations. Your custodian will not check this, and a distribution to the wrong kind of organization is taxable to you in full. You also need written confirmation that you received nothing in return, so a gift that buys you a table at the gala does not count.

Deductible IRA contributions after 70½ reduce your limit. If you are still working and still funding a deductible IRA, those contributions offset your QCD capacity on a running cumulative basis.

Tell whoever prepares your return

Your custodian's 1099-R reports the full amount as an ordinary distribution, with nothing marking it as charitable. Custodians do not code QCDs. The exclusion happens on the return, where the amount is subtracted and the line annotated. If your preparer does not know the QCD happened, you will pay tax on a gift you already made, and nothing on the form will flag it.

I am an Enrolled Agent, admitted to practice before the Internal Revenue Service, and I prepare returns alongside the planning work, which means the distribution and the return that reports it get handled by the same person.

What to do this month

Find out what your RMD is and whether any of it has already come out. Decide what you intend to give. If the gift is smaller than the RMD, send it as a QCD first and take the balance in cash later. If you are past 70½ but not yet taking RMDs, it still belongs in the IRA. Place the request by mid-November and confirm the check cleared before year end.

If you want this sequenced against your own RMD and your own return before December, that is a conversation worth having.

Aaron Randak, CFP®, EA · Golden Acre Wealth Management · Scottsdale, Arizona

Golden Acre LLC dba Golden Acre Wealth Management is an investment adviser registered with the Arizona Corporation Commission, CRD #337930. This article is educational and is not individualized tax, investment, or legal advice. Tax rules change and their application depends on your specific circumstances. Custodian processing rules and cutoff dates vary; confirm them with your own custodian.