Retirement Retirement Planning

New Bill Would Let Retirees Get a Major Tax Benefit From Their 401(k) - Here's What You Need to Know

A bill might give retirees more charitable donation flexibility.

By Paige Cerulli , Edited by Andrea Basse

Updated May 20, 2026

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If charitable giving is part of your retirement plan, a new bipartisan bill might offer more options for how you give. The Charity Parity Act, which has been introduced in the House and Senate, would allow you to make qualified charitable distributions (QCDs) from your 401(k), 403(b), and 457(b) accounts instead of restricting this option to IRA accounts only. The bill could provide you with more giving flexibility.

Here's what to know about the bill, how it might impact giving in retirement, and the potential benefits it might provide.

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Understanding the Charity Parity Act

The Charity Parity Act is designed to allow individuals to make QCDs directly from their 401(k)s or similar workplace retirement plans. Currently, QCDs are available to individuals age 70½ and older, and they must be made directly from a retirement account to a nonprofit. Anyone who wants to make a charitable distribution from a 401(k) has to first roll that money over into an IRA, which comes with several drawbacks.

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The issues of rolling over to an IRA

When an individual rolls money over into an IRA, that process might trigger numerous fees, including account-closing fees, outbound transfer fees, and broker transfer fees. All of those fees eat into the money that the individual wants to donate, potentially shrinking the donation. Plus, if an individual has money that's spread throughout multiple employer 401(k)s, they'll have to undergo that process several times, paying fees for each rollover.

The process is also time-consuming. Rather than being able to donate money directly from a 401(k), an individual must undergo the rollover process, adding a layer of administrative burden to making a donation.

The appeal of QCDs

QCDs offer numerous benefits to individuals who want to make charitable distributions. With a QCD, an individual doesn't have to first withdraw the money to donate it. Withdrawing the money may increase the donor's adjusted gross income, potentially causing an increase in Medicare premiums. But QCDs are excluded from the donor's income, helping avoid those potential consequences.

Additionally, once individuals reach age 73, they must meet required minimum distributions each year by withdrawing a minimum amount from certain retirement accounts each year. QCDs count toward required minimum distributions, allowing charitable distributions to help satisfy that requirement if an individual doesn't want to withdraw money to their accounts.

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QCDs and tax liability

QCDs may help individuals reduce their tax liability. Since QCDs reduce taxable income dollar-for-dollar, they may be appealing to individuals who don't itemize their deductions and wouldn't otherwise receive a deduction for their charitable giving.

However, there are limits to how much individuals and couples may donate in QCDs per year. In 2026, an individual could make up to $111,000 in QCDs. A married couple filing jointly may transfer $111,000 from each individual's account during the year.

Support for the Charity Parity Act

The Charity Parity Act has already received praise and support. Brian Graff, CEO of the American Retirement Association, praised the bill for helping to eliminate unnecessary hoops that donors currently have to jump through to support charitable causes. He explained that the bill helps ensure that retirement savers receive fair treatment no matter where they hold their assets.

By helping reduce the administrative burdens of giving, the legislation may encourage increased charitable giving.

How the One Big Beautiful Bill (OBBB) Act changed charitable giving

The Charity Parity Act comes on the heels of changes that the OBBB already made to charitable giving. Signed into law on July 4, 2025, the OBBB allows individuals who don't itemize deductions to deduct upwards of $1,000 in cash donations to certain charities. Married couples filing jointly may deduct up to $2,000 in donations.

Since the OBBB allows taxpayers to deduct smaller donations, the QCD expansion matters most for taxpayers who are making larger donations and who would like to receive a tax deduction for those gifts.

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When the Charity Parity Act takes effect

The Charity Parity Act has been introduced to the House and Senate, but the legislation has not yet passed. While it may offer appealing benefits to donors and taxpayers with significant retirement savings, there is no information yet on when votes might take place or if or when the legislation might be enacted.

Bottom line

If you're charitably inclined and hold significant retirement savings in a workplace plan, then plan to monitor the Charity Parity Act's progress. Consider flagging this bill for your financial advisor, and stay informed about how the bill's progress might affect your giving options. If the bill passes, you might eventually have more charitable giving options to simplify the process of making donations.

If you plan to make a rollover in the meantime, then be sure to check current IRS rules so you know how that rollover might impact you and how you could avoid money mistakes.

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