Why Rolling a 401(k) Into an IRA Can Open the Door to Tax-Free Charitable Giving — and Why One Year’s RMD Still Gets Left Behind

Moving a 401(k) into an IRA can unlock a tax-free charitable transfer, but one year’s required withdrawal may be trapped in the old account. Before making the move, it is worth understanding how that stranded distribution can affect taxes and Medicare premiums.

A retiree who regularly donates to church may learn about qualified charitable distributions and contact her 401(k) administrator. She may want this year’s required minimum distribution sent directly to the church without tax. Whether the plan is with Fidelity or Charles Schwab, the answer is the same: federal law allows that transfer only from an IRA.

To qualify, she rolls the 401(k) into an IRA. That helps beginning the following year. The required minimum distribution for the year of the rollover cannot move with the rest of the money, and it remains taxable as ordinary income even if she gives it away.

Why a 401(k) Cannot Make a Tax-Free Charity Gift

The qualified charitable distribution, or QCD, comes from Section 408(d)(8) of the Internal Revenue Code. It allows up to $100,000 a year to be excluded from income, with the limit adjusted for inflation. The money must move directly from the trustee to a qualifying charity, and the rule applies only to distributions from an individual retirement plan after the owner reaches age 70½. Ongoing SEP and SIMPLE IRAs are excluded as well.

With inflation indexing, the cap is $111,000 per person in 2026, according to the Congressional Research Service, and each spouse has a separate limit. IRS Publication 590-B says a QCD also counts toward the required minimum distribution.

The statute does not mention 401(k)s, 403(b)s, or other workplace plans, which is why rolling assets into an IRA is the only way to use a QCD.

The RMD That Cannot Follow the Money

The rollover runs into a separate rule in Section 402(c)(4)(B). That provision excludes any distribution required under section 401(a)(9) from being treated as an eligible rollover distribution. Publication 590-B likewise says RMDs cannot be rolled over.

Treasury regulations also treat the first dollars distributed from a plan in an RMD year as the RMD itself. In practice, that means the plan pays the full required amount in cash before any rollover happens.

Consider a hypothetical 74-year-old married retiree filing jointly. Her 401(k) had $800,000 on December 31, 2025, and she rolls it into an IRA in 2026. Using the Uniform Lifetime Table divisor of 25.5 at age 74, her 2026 RMD is about $31,373. That amount is paid to her bank account and appears on her 2026 tax return as income. Only the remaining balance moves to the IRA.

If she tries to place the RMD into the IRA anyway, the IRS treats it as an excess contribution, which is subject to a 6% annual tax for as long as it remains there.

What the Trapped Year Can Cost in Taxes and Medicare Premiums

Suppose she gives her church $15,000 each year. If she writes the check from her bank account in 2026, the donation only helps if the couple itemizes deductions. If they take the standard deduction, it provides no tax benefit. If the same $15,000 were sent as a QCD, it would never be included in income. At a 22% federal tax rate, that difference is worth $3,300.

Medicare can increase the cost further. Income-related monthly adjustment amounts, or IRMAA, are based on modified adjusted gross income from two years earlier, so 2026 income affects 2028 premiums. Using 2026 thresholds as a guide, married couples filing jointly with income above $218,000 pay $284.10 a month each for Part B instead of $202.90. Each spouse also owes a $14.50 monthly surcharge for Part D. Because these are cliffs, going over the limit by even $1 triggers the full charge. If a QCD had kept the couple below the threshold, the trapped year would add $2,296.80 in annual surcharges.

State taxes may also apply. Some states tax retirement withdrawals, while others exempt part or all of them.

Three Ways to Make the RMD QCD-Eligible Again

1. Complete the rollover before RMDs begin. Required minimum distributions generally start at age 73. If the 401(k) is moved into an IRA by December 31 of the year before that age, nothing gets stuck in the workplace plan. After that, RMDs come from the IRA and can be covered by a QCD.
2. Delay the charitable gift until January. If the rollover has already happened this year, waiting a few weeks can help. The rolled funds count in the IRA’s year-end balance, so next year’s IRA RMD includes them. A January QCD can then satisfy that RMD and stay out of taxable income.
3. Use an existing traditional IRA. QCDs from a preexisting traditional IRA still work during the rollover year. They just cannot satisfy the 401(k)’s RMD, because each workplace plan’s required distribution must come from that plan.

There is one exception: if you are still working and own less than 5% of the company, your plan may allow you to postpone 401(k) RMDs until retirement. That can leave enough time to roll the account over before any RMD is due.

The sequence matters. Getting it right can save thousands of dollars a year, and it is wise to review the details with a CPA or fiduciary advisor before filing rollover paperwork.