Blog

Why Qualified Charitable Distributions Still Make Sense for Clients 70½+

As market conditions shift and new legislation takes shape, advisors are reexamining every strategy that helps clients achieve their financial and charitable goals. One strategy in particular—already well-loved by many seasoned donors—deserves renewed attention: the Qualified Charitable Distribution, or QCD.

IRA assets in the U.S. now total nearly $18 trillion, and most clients nearing or in retirement hold at least one. Traditional IRAs are often among the most heavily taxed assets, with withdrawals treated as ordinary income. Once clients reach age 73 and must begin taking required minimum distributions (RMDs), those withdrawals can nudge them into higher tax brackets. On top of that, IRA assets are fully taxable in an estate, meaning heirs could face both income and estate taxes—often shrinking what’s left to pass down.

This is where QCDs become especially valuable. A QCD allows clients aged 70½ and older to transfer up to $108,000 (per taxpayer in 2025) directly from an IRA to a qualified charity. The transfer satisfies RMD requirements but doesn’t increase taxable income—a meaningful distinction that can make a noticeable difference in both charitable and financial outcomes.

Why QCDs Matter More Than Ever

Recent legislative changes, including those introduced through the One Big Beautiful Bill Act (OBBBA), are influencing how taxpayers approach charitable giving. While the Act doesn’t directly alter QCD rules, it shifts the charitable planning landscape in ways that make QCDs even more appealing.

Unlike itemized charitable deductions, QCDs reduce a donor’s adjusted gross income (AGI). This difference is important because a lower AGI can help clients avoid Medicare surcharges (like IRMAA) and preserve other deductions and credits that would usually phase out with rising income.

That’s a crucial difference, since lower AGI can help clients avoid Medicare surcharges (IRMAA) and preserve other deductions and credits that phase out as income rises.

Looking ahead, new limitations scheduled for 2026 under the OBBBA will likely reduce the tax benefit of traditional charitable deductions. Charitable contributions will face a 0.5% of AGI floor and a 35% deduction cap for high-income taxpayers—even those in the 37% bracket. That means some clients may see smaller tax advantages from their regular itemized charitable deductions. QCDs, by contrast, sidestep those limitations altogether.

Pairing QCDs with Community Foundation Funds

Clients can direct their QCDs to eligible funds at the community foundation, such as designated funds (which support specific organizations), field-of-interest funds (which focus on certain causes), or unrestricted funds (which respond to the community’s greatest needs). And while donor-advised funds can’t receive QCDs, some families like to combine both approaches, leaving a donor-advised fund open for flexible giving but also having a QCD-eligible fund available for direct giving.

While donor-advised funds can’t receive QCDs, many families combine both approaches—using a donor-advised fund for flexible grantmaking and a QCD-eligible fund for direct charitable gifts. An approach like this gives clients an organized way to give that’s still tax efficient, without ignoring the causes they care about most.

A Reliable Tool in Changing Times

In a changing tax landscape, it becomes more important than ever to balance generosity with efficiency. QCDs remain a simple and effective way for clients to meet those required distributions, lower their taxable income, and still make a real impact in their communities.

As the tax landscape evolves, strategies that balance generosity and efficiency will only grow in importance. The QCD remains one of the simplest, most effective ways for clients to meet required distributions, lower taxable income, and make a visible difference in the community.

Now is a great time to revisit QCD opportunities with your clients. Together, we can help them give meaningfully, reduce tax exposure, and strengthen the community they’ve helped build.