What Is a Qualified Charitable Distribution for US Expats?
A Qualified Charitable Distribution (QCD) lets IRA owners age 70½ and older transfer up to $111,000 per calendar year directly to a qualifying charity, excluded from taxable income entirely. No itemizing required. For Americans spending time in Costa Rica with IRA assets, the QCD is usually the most tax-efficient charitable giving strategy available.
Why Standard Charitable Deductions Often Don't Help Expat Retirees
This is the part most charitable giving guides skip.
To deduct a cash donation from your federal taxes, you have to itemize. As of 2026, only about 10% of US taxpayers itemize deductions (IRS Statistics of Income data, Tax Policy Center estimates post-TCJA). Everyone else takes the standard deduction, which means every dollar they give to charity produces exactly zero federal tax benefit.
Most retirees spending time abroad fall into this group. Social Security income, pension income, and IRA distributions often don't push itemized deductions high enough to clear the standard deduction threshold, especially without a large mortgage interest deduction. You give generously and get nothing back at tax time.
The QCD fixes this. It does not create a deduction. Instead, it excludes the distributed amount from your gross income entirely. You never pay tax on money that goes directly from your IRA to the charity. That exclusion happens whether you itemize or not.
One rule to know: you cannot take the QCD exclusion and also claim the same amount as a charitable deduction. It is one or the other. Since the exclusion is typically more valuable, the QCD wins for most retirees.
For more on how US taxes work when you spend time in Costa Rica, see US Tax Obligations for Americans Living in Costa Rica.
What Are the QCD Rules for 2026?
| Rule | Detail |
|---|---|
| Minimum age | 70½ at the time of the distribution |
| Annual limit | $111,000 per person per calendar year (resets each January 1; IRS 2026 cost-of-living adjustment, IRC Section 408(d)(8)) |
| Eligible accounts | Traditional IRA, Rollover IRA, Inherited IRA |
| Not eligible | 401(k), 403(b), active SEP-IRA, active SIMPLE IRA |
| Transfer method | Must go directly from IRA custodian to charity, never to you first |
| RMD credit | Counts toward your Required Minimum Distribution for the year |
| Double-dipping | Cannot also claim the same amount as a charitable deduction |
| Married couples | Each spouse can give up to $111,000 from their own IRA, for $222,000 combined per year |
The transfer method matters more than most people realize. If your IRA custodian writes the check to you and you then send a check to the charity, that distribution is taxable income. The QCD requires the charity to be the payee from the start.
SECURE Act 2.0 also created a one-time QCD option to fund a Charitable Gift Annuity or Charitable Remainder Trust, up to $55,000 in 2026 (indexed for inflation per IRS 2026 cost-of-living adjustment). That is a planning tool for larger gifts, not the everyday QCD, but worth discussing with your advisor if you are considering a significant charitable commitment.
How Does a QCD Affect Your Social Security and Medicare Costs?
Lower taxable income is the headline benefit. The downstream effects on Social Security taxation and Medicare premiums are often larger than the direct tax savings.
Social Security taxation
Up to 85% of your Social Security benefit is subject to federal income tax, depending on your "provisional income": adjusted gross income, plus non-taxable interest, plus 50% of your SS benefits. These thresholds have not been adjusted for inflation since 1984.
| Filing Status | Provisional Income | SS Taxable |
|---|---|---|
| Single | Under $25,000 | 0% |
| Single | $25,000 to $34,000 | Up to 50% |
| Single | Over $34,000 | Up to 85% |
| Married Filing Jointly | Under $32,000 | 0% |
| Married Filing Jointly | $32,000 to $44,000 | Up to 50% |
| Married Filing Jointly | Over $44,000 | Up to 85% |
A QCD that reduces your AGI by $20,000 can shift you from the 85% bracket to the 50% bracket. On a $30,000 annual SS benefit, that is roughly $7,000 less income exposed to tax. Using a 22% marginal rate as an example, that is about $1,540 in additional tax savings, on top of not paying tax on the $20,000 QCD itself. Your actual savings will depend on your marginal bracket.
Medicare IRMAA surcharges
If you are enrolled in Medicare Part B, your premium is based on your income from two years prior. In 2026, the base Part B premium is $202.90 per month. Exceed the income thresholds and it climbs.
| 2024 MAGI (Single) | 2026 Monthly Part B Premium |
|---|---|
| Under $109,000 | $202.90 |
| $109,000 to $136,999 | $284.10 |
| $137,000 to $163,999 | $365.30 |
| $164,000 to $499,999 | $446.40 |
| $500,000+ | $689.90 |
Source: CMS 2026 Medicare Part B premium schedule. For joint filers, the thresholds roughly double: no surcharge below $218,000 (CMS 2026), then the same bracket structure above that.
A QCD that keeps your 2026 MAGI below $109,000 saves $81.20 per month compared to the next bracket, or $974 per year. For a couple, double that.
Note: many Americans spending time in Costa Rica delay or opt out of Medicare Part B enrollment, since Medicare does not cover care outside the United States. If you are not enrolled in Part B, IRMAA does not apply. If you plan to return to the US or maintain Part B enrollment, this calculation is worth running. See Healthcare in Costa Rica for Expats for more on how the US healthcare picture fits into the broader planning picture.
Can You Use a QCD to Support Causes in Costa Rica?
The IRS requires QCDs to go to a US public charity recognized under Section 501(c)(3). A local Costa Rican nonprofit, school, or church does not qualify unless it holds US 501(c)(3) status directly.
This rules out most local organizations, which are registered under Costa Rican law as Asociaciones or Fundaciones, not IRS-recognized entities.
It also rules out donor-advised funds (DAFs). If you direct a gift through Fidelity Charitable, Schwab Charitable, or a community foundation, that gift does not qualify as a QCD even if the final recipient would qualify on its own.
The path forward: find a US-registered 501(c)(3) that does its work in Costa Rica. Several exist.
Which US 501(c)(3) Organizations Fund Work in Costa Rica?
| Organization | Focus Area | Notes |
|---|---|---|
| Amigos of Costa Rica | Fiscal sponsor for CR nonprofits across sectors | Channels donations to CR organizations; US 501(c)(3) |
| Corcovado Foundation | Environmental conservation, South Pacific | Protects ecosystems; benefits local communities |
| Osa Conservation | Biodiversity, Osa Peninsula | Registered US 501(c)(3) |
| CEPA Foundation | Children's education, underprivileged youth | Supports programs in Costa Rica |
| Costa Rica Humanitarian Foundation | Community development, volunteerism | Verify current status before giving |
All organizations in this table should be verified before executing a QCD. Before executing a QCD to any organization: verify current 501(c)(3) status and confirm it is a public charity (not a private foundation or supporting organization) using the IRS Tax Exempt Organization Search at apps.irs.gov/app/eos. Status can change, and you need to confirm eligibility at the time of your gift.
Amigos of Costa Rica is particularly useful for expats who want to support smaller local organizations. As a fiscal sponsor, Amigos channels donations through their US 501(c)(3) to CR-based nonprofits that do not have US registration on their own. Their affiliate directory lists the current organizations they support.
What Are Your Options If You're Under Age 70½?
If you have not reached 70½ yet, or want to give more than $111,000 in a single year, a few strategies still produce real tax benefit.
Bunching donations
Instead of giving $10,000 per year for five years, give $50,000 in a single year. If that pushes your itemized deductions above the standard deduction threshold, you get a federal deduction that year. In the years between, take the standard deduction. This works best for people near the itemization threshold.
Donor-advised funds
Open a DAF at Fidelity Charitable, Schwab Charitable, or a community foundation. Contribute a lump sum in a high-income year, including appreciated securities, and claim the full deduction that year. Then recommend grants to specific charities over several years on your own timeline. You get the deduction upfront and control the distribution pace separately.
Important: DAFs cannot receive QCD distributions. They are two different tools for two different situations.
Appreciated securities
If you own stocks or mutual funds with large embedded gains, donating them directly to a 501(c)(3) avoids capital gains tax entirely and gives you a deduction equal to the full market value. This is often the highest-leverage charitable move for investors with taxable accounts. The charity receives the full value. You avoid the gain. The IRS gets nothing.
How Do You Execute a QCD Step by Step?
- Confirm you are 70½ or older and your total QCDs for the year will not exceed $111,000.
- Verify the charity's current 501(c)(3) status on the IRS EOS tool at apps.irs.gov/app/eos.
- Contact your IRA custodian (Schwab, Fidelity, Vanguard, etc.) and request a qualified charitable distribution. Most have a specific form or online process.
- The custodian sends a check payable to the charity directly. The check must be made out to the charity, not to you.
- Deliver or mail the check to the charity promptly and obtain written acknowledgment.
- At tax time, your 1099-R will show the full distribution amount. You reduce that figure on your Form 1040 (line 4b) and write "QCD" next to it. Your tax software should handle this, but verify it.
- Keep the charity's acknowledgment letter with your tax records.
The most common mistake is taking the distribution personally first. Once the check is made out to you, it is taxable income regardless of where you send it afterward.
FAQ
Does living in Costa Rica affect my ability to make a QCD?
No. QCD eligibility is based on your age and IRA ownership, not where you live. US citizens spending time in Costa Rica who meet the age requirement and hold a Traditional, Rollover, or Inherited IRA (provided the account holder is 70½ or older) can make QCDs the same as anyone else. Your US tax filing obligations remain in place, and the QCD exclusion applies on your Form 1040.
Can I donate to a local Costa Rican church, school, or charity and get a US tax deduction?
Generally, no. To qualify for a US tax deduction or QCD exclusion, the organization must be a US public charity recognized under Section 501(c)(3). Most Costa Rican organizations are registered under local law and do not meet this standard. The exception: if the organization partners with a US 501(c)(3) fiscal sponsor like Amigos of Costa Rica, donations through that sponsor may qualify. Verify on the IRS EOS tool before giving.
Does a QCD count toward my Required Minimum Distribution?
Yes. A QCD counts dollar-for-dollar toward your RMD for the year. If your RMD is $30,000 and you make a $30,000 QCD, your RMD is fully satisfied with zero taxable income from that distribution. This is one of the most compelling reasons to use QCDs rather than taking the RMD first and donating cash separately.
Can my spouse also make a QCD from their IRA?
Yes, if your spouse is also 70½ or older and has their own eligible IRA. Each person has a separate $111,000 annual limit based on their own account. A married couple can each contribute up to $111,000 per calendar year from their respective IRAs, for a combined annual maximum of $222,000.
Should I use a QCD or a donor-advised fund?
They serve different purposes. A QCD is better if you are 70½ or older, want to satisfy your RMD with zero tax, and are giving to a qualifying public charity directly. A DAF is better if you want to make a large contribution in a high-income year, give appreciated securities, and distribute to multiple charities over time. You cannot use a QCD to fund a DAF. For the families I work with who are both charitable and retired, QCDs are the first conversation. DAFs are the second.
Brennan Vitali is a CFP® and cross-border financial planner who spends time in Costa Rica. Charitable planning, QCDs, and cross-border tax strategy are part of the financial architecture we build for families making this move. Take the Readiness Quiz or book a discovery call.