DAF vs QCD vs CRT at $115K Giving: Which Wins After 70

The decision in one worked example

Meet Harold and Diane, both 73, filing jointly and living in Ohio. Harold holds a $1,000,000 traditional IRA. Their giving is steady and predictable: roughly $40,000 a year to their church and two local charities. Their other income (Social Security plus a pension) lands them squarely in the 24% federal bracket (MFJ: $206,701–$394,600 for 2026). They take the $31,500 MFJ standard deduction — their other itemizable expenses do not come close.

At 73, Harold has a required minimum distribution. Using the IRS Uniform Lifetime Table divisor of 26.5 (Pub. 590-B, Table III), his RMD is about $37,700 — 3.77% of the prior-year-end balance. That $37,700 is fully taxable as ordinary income whether he wants it or not. The question is not whether to give; it is which vehicle turns their $40,000 of giving into the largest tax reduction.

The answer is the QCD, and the margin is not close. Here is why, and here is when the DAF or CRT would change the verdict.

Route 1: The QCD — excludes the gift before tax is calculated

A qualified charitable distribution moves money directly from Harold’s IRA trustee to a qualified charity. Under IRC §408(d)(8), that transfer is excluded from gross income. It never appears as income on the 1040, and it counts toward the RMD dollar-for-dollar.

So Harold instructs his IRA custodian to send $40,000 directly to his three charities. That $40,000:

• Satisfies his entire $37,700 RMD — none of it hits his return.
• Excludes the full $40,000 from adjusted gross income (AGI).
• Requires no itemizing — the benefit stacks on top of the $31,500 standard deduction.

The 2026 QCD limit is $115,000 per person (inflation-indexed under SECURE 2.0 §307, up from the long-frozen $100,000), so a $40,000 QCD sits comfortably under the ceiling. Federal tax saved versus simply taking the RMD and writing checks: $40,000 × 24% = $9,600. Because the income never lands in AGI, it also avoids dragging them toward IRMAA Medicare surcharges and avoids pushing more of their Social Security into the 85%-taxable zone — second-order wins the deduction routes cannot match.

Route 2: The DAF — a deduction you may not get to use

A donor-advised fund lets Harold contribute appreciated assets now, take an itemized deduction now, and recommend grants to charities over time. The signature DAF move is donating appreciated stock: he gives shares worth $40,000 (cost basis $10,000), the DAF sells them tax-free, and Harold avoids the capital gains tax on the $30,000 of appreciation.

That capital-gains avoidance is real. At the top long-term rate plus the 3.8% net investment income tax, the avoided gain is worth up to 23.8% (IRC §1(h) plus §1411). On a $30,000 gain, that is up to $7,140 saved. But two problems shrink the DAF’s edge for Harold specifically:

1. The deduction may be wasted. A $40,000 charitable deduction only helps if Harold itemizes. With $31,500 of standard deduction already guaranteed, his first roughly $31,500 of itemized deductions buys him nothing extra. If charitable gifts are his only large itemizable item, much of the deduction is absorbed before it produces a dollar of savings.
2. It does nothing about the RMD. A DAF contribution of stock does not satisfy his $37,700 RMD. He still has to pull that $37,700 out of the IRA and pay 24% — $9,048 — on it regardless of the stock gift.

The DAF is the right tool when you have a low-basis stock position you want to unload tax-free, when you want to bunch several years of giving into one high-deduction year, or when your itemized deductions already clear the standard deduction. For Harold, who gives cash from an IRA every year and takes the standard deduction, it is the wrong tool.

Route 3: The CRT — built for income, not for annual cash giving

A charitable remainder trust is an irrevocable trust that pays Harold (or a named beneficiary) an income stream for life or a term of years, then leaves the remainder to charity. Funding a CRT produces a partial charitable deduction equal only to the present value of the charitable remainder — not the full contribution. Under IRC §664, the remainder must be projected at at least 10% of the funding value, and the payout must be between 5% and 50% annually.

For a living 73-year-old who wants to give $40,000 a year out of current cash flow, the CRT is overbuilt. It costs $5,000–$10,000+ to draft, requires ongoing trust accounting and a separate tax return (Form 5227), and locks the assets up irrevocably. The deduction is partial, and the income it throws off is itself taxable on a four-tier ordering rule.

The CRT’s real moment comes at death, not during life. Naming a CRT as the beneficiary of a large IRA lets the trust stretch distributions over a beneficiary’s lifetime — sidestepping the SECURE Act 10-year drain rule that otherwise forces a non-spouse heir to empty an inherited IRA (and pay the resulting tax) within ten years. That is an estate-planning play, not an annual-giving play. For Harold’s $40,000-a-year question, it is the wrong answer.

Head-to-head on the same $40,000 gift

For Harold and Diane, the QCD’s ~$9,600 beats the DAF’s best-case cap-gains savings of ~$7,140 — and the DAF leaves the $37,700 RMD fully taxable on top, an extra $9,048 of tax the QCD eliminates. There is no scenario in their fact pattern where the DAF or CRT comes out ahead.

What most people miss: the “first dollars out” trap

The single most expensive QCD mistake is taking your RMD first and doing the QCD afterward. RMD rules use a “first dollars out” convention: the first distributions you take from the IRA in a year are deemed to satisfy the RMD. If Harold takes a $37,700 cash RMD in January and then does a $40,000 QCD in November, the January money is already taxable RMD income — the QCD no longer offsets it. He gets the exclusion on the QCD, but he has needlessly added $37,700 to his AGI.

The fix is sequencing: do the QCD before taking any other IRA distribution for the year. Let the QCD be the first dollars out, and it absorbs the RMD cleanly. This is mechanical, not a judgment call — and it is where DIY QCDs most often go wrong.

Three more myths worth correcting:

• “A QCD gives me a deduction.” No — and that is the point. A deduction has to clear the $31,500 standard-deduction hurdle to do anything. An exclusion removes the income before the return is even calculated, so it works whether or not you itemize. The exclusion is structurally better than the deduction for most retirees.
• “I can send my QCD to my donor-advised fund.” You cannot. IRC §408(d)(8)(B)(i) bars QCDs to DAFs, supporting organizations, and private foundations. The check must go to an operating public charity.
• “The QCD limit is still $100,000.” It was frozen at $100,000 for years, but SECURE 2.0 indexed it. For 2026 it is $115,000 per person. Older articles — and some IRA custodians’ web pages — still show $105,000. Use the current $115,000 figure.

When the DAF actually wins

Switch Harold’s facts and the answer flips. The DAF is the better route when:

• You hold deeply appreciated stock outside an IRA. Donating $40,000 of stock with a $5,000 basis avoids 23.8% on $35,000 of gain — about $8,330 — and the charity sells it tax-free. A QCD from an IRA cannot touch that embedded gain.
• You want to bunch. Funding a DAF with five years of giving in one year ($200,000) can vault you over the standard deduction in that year, then you take the standard deduction in the four lean years and grant from the DAF.
• You are under 70½. QCDs require age 70½. Before that, the DAF is your appreciated-asset giving vehicle.

When the CRT actually wins

The CRT justifies the added complexity in exactly one common situation for an IRA owner: you want to leave a large IRA to charity at death while still providing income to a non-spouse heir. Naming a CRT as the IRA beneficiary lets the trust receive the full IRA balance income-tax-free at death (charities pay no income tax on the inherited IRA), then pay your heir an income stream for life — converting the SECURE Act’s punishing 10-year drain into a multi-decade payout. The trade-off: the remainder goes to charity, not the family. It is an estate-design choice, not an annual-giving choice.

The decision lever

Ask one question first: are you giving cash, every year, from a traditional IRA, after 70½? If yes — which describes most charitably inclined retirees facing RMDs — the QCD is the answer. It is free to execute, it erases RMD income from your return, it works without itemizing, and it keeps your AGI down for IRMAA and Social Security taxation. For Harold and Diane, that is a clean ~$9,600 federal saving on the gift plus elimination of $9,048 of forced RMD tax, with no setup cost.

Reach for the DAF only when you have appreciated stock or a reason to bunch. Reach for the CRT only when the question is about beneficiaries and income after death. Everything else is the QCD — and the lever that turns it from good to optimal is sequencing it as the first IRA dollars out the door each January.