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☕ DrinkCoffeeAndProfit
Smart money moves before breakfast
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Inspiration Quote for the Day
“It is more blessed to give than to receive.”
Acts 20:35
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The Morning Ritual
Bev Gives Her Church $4,000 a Year. Her Tax Return Only Counts Half.
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My wife’s cousin Bev keeps a checkbook in the kitchen drawer, right next to a stack of blue church envelopes. Every quarter she writes the same check. `$1,000`, signed in the same careful hand, dropped in the plate on Sunday.
Bev is 75. Each January she also takes her required withdrawal from her IRA, about `$12,000`. She pays tax on all of it, then gives part of it away. Here is what caught my eye. The way that money travels decides how much of her giving the tax return ever sees.
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Bev’s IRA pays her once a year, every January. Some investors set things up so money lands every month instead. Our partner below explains one way.
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· · · Partner Message · · ·
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In One Sip
► Starting this year, people who take the standard deduction can also deduct cash gifts to charity. The cap is `$1,000`, or `$2,000` for married couples. Source: IRS, One Big Beautiful Bill provisions.
► The 2026 standard deduction is `$32,200` for married couples. Most retirees never itemize. Source: IRS inflation adjustments.
► A qualified charitable distribution, or QCD, sends money straight from an IRA to a charity. It never counts as your income. Source: IRS rules via Vanguard.
► The 2026 QCD limit is `$111,000` per person, up from `$108,000`. You must be at least 70½. Source: IRS Notice 2025-67.
► The buried part: a QCD counts toward your required withdrawal for the year. Take the full withdrawal first, and a later QCD cannot make it tax-free.
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Why It Matters for Your Money
Bev and her husband file jointly and take the standard deduction. Run her `$4,000` both ways.
By check: the new rule lets them deduct `$2,000`. The other `$2,000` gets no tax break at all.
By QCD: all `$4,000` goes from the IRA straight to the church. Their reported income drops by the full `$4,000`.
That keeps `$2,000` more off the return. In the `12%` bracket, it saves about +`$240` a year. In the `22%` bracket, about +`$440`.
Over ten years of the same giving, that adds up to `$2,400` or more. Same church. Same envelopes. Different route.
Lower income can also shrink how much of their Social Security gets taxed. That part depends on the household, so ask whoever does your return.
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· · · Partner Message · · ·
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The Wealth Angle
Here is where it gets interesting. Congress gave non-itemizers a charity deduction this year, and it sounds generous. For small gifts, it is.
For a couple giving more than `$2,000`, the cap stops counting. The QCD keeps counting all the way to `$111,000`.
Think about that for a second. The people most likely to give from retirement money are the same people the new deduction tops out on.
There is a second-order effect too. A dollar kept off your return also stays out of the income test for the new `$6,000` senior deduction. That deduction starts phasing out at `$150,000` for couples.
I think the QCD is the most underused move in retirement tax planning. It costs nothing. It needs one form from your IRA custodian.
The catch is order and timing. Withdrawals taken first cannot be redone, and custodians get busy in December.
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A QCD protects the money you give away. The money that stays in the IRA still deserves a look. Our partner below makes that case.
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· · · Partner Message · · ·
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☕ Key Insight:
Giving by check caps a couple’s tax break at `$2,000` this year. Giving straight from an IRA after 70½ can keep the whole gift off the return.
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Coffee Break Move
Before your second cup, find two numbers. What you gave last year, and whether you have taken this year’s IRA withdrawal yet.
If you are 70½ and still owe some of this year’s withdrawal: call your IRA custodian. Ask for their QCD form. The check goes to the charity, never to you. Tell your tax preparer, since the year-end IRA form may show the full amount.
If you already took the full withdrawal: plan next year’s giving as a QCD, early in January, before the regular withdrawal.
If you are younger than 70½: the new `$1,000` or `$2,000` deduction is yours. Keep the receipts.
Bev mailed her custodian’s form on Friday. The church still gets `$4,000`. Her return now shows `$4,000` less income.
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