401(k) charitable donations take center stage in Charity Parity Act

Older Americans could get another way to make tax-free charitable donations from their retirement savings under a new bipartisan, bicameral bill in Congress.

Called the Charity Parity Act and introduced in both the House and Senate on Wednesday, the measure would allow so-called qualified charitable distributions, or QCDs, to be made from 401(k)s and similar workplace retirement plans.

Under current law, QCDs — only available to people age 70½ or older — must be from an individual retirement account directly to a qualifying nonprofit. This means that if you want to use money from your 401(k) to do a QCD, the amount must first be rolled over to an IRA.

“American retirement savers should not have to jump through unnecessary hoops to support charitable causes simply because their savings are held in a 401(k), 403(b) or other employer-sponsored retirement plan instead of an IRA,” said Brian Graff, CEO of the American Retirement Association, in a statement released when the bills were introduced. The group represents retirement plan professionals and engages in policy advocacy.

It’s unclear how likely the bills are to pass. The House bill was referred to the Ways and Means Committee; the Senate bill was sent to the Finance Committee.

For example, it can cause Medicare premiums to rise due to income-related monthly adjustment amounts, or IRMAAs, that get tacked on to premiums for Part B (outpatient care) and Part D (prescription drugs) coverage for higher earners.

QCDs, on the other hand, are excluded from a donor’s income.

These distributions also can count toward satisfying required minimum distributions, which are amounts that must be withdrawn from certain retirement accounts starting at age 73.

For 2026, the annual QCD limit is $111,000 per individual. A married couple that files a joint return could transfer $111,000 from each of their IRAs in the same year.

“I do think the proposed legislation makes sense from both a policy and practical perspective,” said tax attorney Richard Fox, founder of the Law Offices of Richard L. Fox in Gladwyne, Pennsylvania. He specializes in philanthropic planning.

“The proposal is less about creating a major new charitable tax incentive and more about modernizing the rules to reflect current retirement planning realities,” Fox said. “The bill essentially would eliminate what many view as an unnecessary rollover step and permit retirees to make direct charitable transfers regardless of the type of retirement account holding the assets.”

The new companion bills join another bipartisan, bicameral effort to change rules pertaining to QCDs. That set of proposed legislation would allow IRA owners to direct their QCDs to donor-advised funds, which is not allowed under current law.

A DAF is a charitable giving account managed by a public nonprofit. Donors receive an upfront tax deduction for their contribution to the fund and can recommend donations to qualifying charities over time.

Large plans are increasingly adding features to their plans that may entice retirees to keep their funds in those plans rather than move them to IRAs or elsewhere. This includes providing more flexibility for retiree withdrawals and offering annuity options in their lineups.

“Large employer plans often now offer institutional pricing, sophisticated investment options and retirement-income features that compare favorably to retail IRAs,” Fox said. “In addition, modern plans generally permit more flexible distribution options than many plans historically allowed.”

Most 401(k) plans let you leave your assets there, including when you retire — though 2% require you to move your money by age 65 or age 70, according to Vanguard. It’s a share that has remained very low over the years: In 2014, it was 4%.