While the economic and legislative environment continues to evolve, most charitable vehicles for meeting both financial and charitable goals remain largely unchanged. Among the most powerful tools for achieving tax efficiency and community impact in this space for clients age 70½ and older is the Qualified Charitable Distribution, or QCD.

IRA assets in the United States total nearly $18 trillion.  You’re likely very aware that traditional IRAs are among the most heavily taxed assets for retirees because withdrawals are generally treated as ordinary income, often pushing retirees into higher tax brackets when they begin taking required minimum distributions at age 73. In addition, IRAs are fully includable in the owner’s taxable estate, meaning heirs may face both estate taxes and income taxes when they inherit the account. This double layer of taxation can significantly erode the value of an IRA, making it one of the least tax-efficient assets to pass to beneficiaries compared to other holdings. 

Against this backdrop, the QCD can come in very handy. A QCD allows an individual aged 70½ and older to give up to $108,000 in 2025 directly from an IRA to an eligible charity. As a result, the QCD is a tax-savvy way for donors to fulfill charitable intentions while managing taxable income.

Here’s why QCDs are more important now than ever:

–Although the OBBBA doesn’t directly change QCD rules, it’s likely to make them even more relevant. The reason is that QCDs reduce adjusted gross income (AGI) rather than operating as an itemized deduction. That distinction is crucial because recent tax law changes will continue to influence how many taxpayers itemize, particularly older adults.

–Because a QCD can count toward required minimum distributions (RMDs) without increasing taxable income, it provides a double benefit: supporting charitable organizations while helping to manage income-related Medicare surcharges (IRMAA) and preserving tax credits and deductions that phase out as AGI rises.

–Starting in 2026, the Internal Revenue Code will impose a 0.5 percent of Adjusted Gross Income (AGI) floor for deducting charitable contributions. It will also cap the benefit at 35 percent, even when the taxpayer’s top marginal rate is 37 percent. The practical impact is that high-income-earning donors will experience reduced tax advantages from traditional itemized charitable deductions in the years ahead.

The team at the community foundation can help you and your financial advisor structure a QCD that supports the causes you care about—whether through a field-of-interest, designated, or unrestricted fund.