Retirement Accounts: The Most Tax-Efficient Way to Fund Breakthroughs
For many donors, the most expensive asset they own isn’t their home; it’s their IRA. Because traditional IRAs and 401(k)s are funded with pre-tax dollars, every withdrawal is taxed as ordinary income. However, through a Qualified Charitable Distribution (QCD), you can transform these “tax-heavy” assets into a powerful, tax-free fuel for neuroscience research at Barrow.
2026 Update: New Giving Limits and Rules
Under the SECURE Act 2.0 and the latest IRS inflation adjustments (Notice 2025-67), the rules for 2026 have changed to your advantage:
- The New Annual Limit: You can now transfer up to $111,000 per year directly from your IRA to Barrow Neurological Foundation tax-free.
- The Spousal Advantage: If you file jointly, both you and your spouse can each give $111,000 from your respective IRAs, for a total of $222,000 in annual impact.
- The Required Age: While the age for Required Minimum Distributions (RMDs) is now 73, you can still begin making tax-free QCDs starting at age 70½.
The “Once-in-a-Lifetime” CGA Option
A major provision of the SECURE Act 2.0 allows you to make a one-time distribution of up to $55,000 (2026 limit) from your IRA to fund a Charitable Gift Annuity (CGA). This unique strategy allows you to:
- Satisfy your RMD for the year.
- Receive a fixed lifetime income stream.
- Establish a significant future gift for Barrow.
QCD vs. Cash Donation: The Tax Difference
| Factor | Cash Donation | IRA QCD Gift |
| Impact on adjusted gross income (AGI) | No Change | Reduces AGI |
| Standard Deduction | May not benefit | Full Benefit |
| Medicare Premiums | No Effect | Can Lower Premiums |
| RMD Satisfaction | No | Yes |
Naming Barrow Neurological Foundation as Beneficiary
If you don’t need your IRA for lifetime income, it is often the best asset to leave to charity. Because Barrow Neurological Foundation is a tax-exempt organization, we receive 100% of the account value. If you leave that same IRA to an heir, the SECURE Act requires them to withdraw the full amount within 10 years, potentially pushing them into a much higher tax bracket.
Frequently Asked Questions
Can I make a QCD from my 401(k)?
No. QCDs can only be made from IRAs. However, you can roll your 401(k) or 403(b) into an IRA and then initiate the QCD from that new account.
Does the check have to come to me first?
No. To qualify, the funds must be transferred directly from your IRA custodian to Barrow. If you receive the money first, it becomes taxable income.
What is the new 2026 QCD limit for married couples?
For the 2026 tax year, the individual QCD limit has increased to $111,000 due to inflation indexing. This means a married couple, where both spouses have their own IRAs and are at least 70½, can collectively donate up to $222,000 tax-free in a single year. This is a significant increase from the original $100,000 cap.
How do I report a QCD on my tax return so it isn’t taxed?
This is a common point of confusion because your IRA custodian’s Form 1099-R usually shows the full distribution as “taxable.” To ensure you aren’t taxed:
- Report the full distribution on Form 1040, Line 4a.
- On Line 4b (the taxable amount), enter $0 (if the whole gift was a QCD) or the remaining taxable portion.
- Check the “QCD” box on line 4c (new for 2025/2026 forms) to signal to the IRS why that income is being excluded.
Does a QCD to a Charitable Gift Annuity (CGA) count toward my RMD?
Yes. One of the most powerful provisions of the SECURE Act 2.0 is the “once-in-a-lifetime” election to move up to $55,000 (2026 limit) from your IRA to fund a CGA. This distribution does count toward your Required Minimum Distribution (RMD) for the year, allowing you to satisfy your tax obligations while securing a fixed income stream for yourself or your spouse.
Take the Next Step in Your Philanthropic Journey
Ready to explore which planned giving vehicle is right for you?
- Explore Our Technical Guides: For detailed gift descriptions, interactive calculation tools, and expert assistance, visit our dedicated gift planning portal at barrow.mygiftlegacy.org.
- Request a Personalized Illustration: See exactly how a gift would look for your tax bracket and estate plan. Contact our Philanthropy Officers today at (602) 406-3041.
- Join the Legacy Society: If you have already included Barrow in your will or trust, please let us know. We would love to thank you today and ensure your gift is directed exactly where you want it to make the most impact.
Barrow Neurological Foundation 100% of every donation goes directly to research and care. Tax ID #: 86-0174371.
