A recent Wall Street Journal article highlighted an unexpected beneficiary of Trump’s tax legislation: older Americans who make charitable contributions directly from their traditional IRAs. These donations, known as qualified charitable distributions (QCDs), remained unchanged in the tax overhaul, but the surrounding tax landscape has made them increasingly attractive for senior donors.

The enhanced appeal stems from how QCDs interact with other provisions in the tax code. Beginning this year, IRA owners using QCDs can better capitalize on expanded state and local tax deductions and the new $6,000 senior deduction. Looking ahead to next year, they’ll also sidestep reductions to itemized charitable deductions on Schedule A.

Adding to their appeal, the IRS has recently streamlined tax reporting requirements for these donations, addressing a longstanding complication for donors.

Eligible donors can begin utilizing QCDs at age 70½. The mechanism is straightforward: rather than writing personal checks or transferring assets like stocks, donors instruct their IRA custodian to send funds directly to qualifying charities such as schools, churches, or similar organizations.

QCDs offer a triple tax advantage. The original contributions to the IRA avoided taxation, any investment growth occurred tax-free, and the charitable distribution itself generated no taxable income—creating a particularly efficient giving strategy for tax-conscious seniors.    

The advantages of QCDs extend even further by reducing required minimum distributions (RMDs) that kick in at age 73 and typically face full taxation, creating additional tax savings.       

Understanding Qualified Charitable Distributions (QCDs)

A qualified charitable distribution enables individuals aged 70½ and older to donate up to $108,000 annually directly from their IRA to qualifying charities without triggering any tax liability. This strategy allows donors to fulfill their required minimum distribution obligations while avoiding any increase to their taxable income—helping them sidestep benefit phase-outs and higher tax brackets.

How QCDs Work with Required Minimum Distributions

Beginning at age 73, IRA account holders are required to make mandatory annual withdrawals, known as required minimum distributions (RMDs). These withdrawals typically count as taxable income, potentially pushing retirees into higher tax brackets or causing them to lose income-based benefits.

However, IRA owners can strategically direct their RMD—or a portion of it—straight to qualified charities through a QCD. This direct transfer satisfies the distribution requirement without generating taxable income for the donor.

The Tax Advantages

Making charitable gifts through IRA QCDs can meaningfully reduce federal taxable income and may unlock additional tax benefits. Since the distribution bypasses the donor’s tax return entirely, it helps maintain lower adjusted gross income levels, which can preserve eligibility for various tax advantages and avoid income-related surcharges on Medicare premiums and investment income.  

The mechanism works as follows: Consider someone with $40,000 in mandatory IRA withdrawals who channels $10,000 of that amount to charities through QCDs. The taxable portion of their distribution shrinks to just $30,000.

This reduction carries broader implications because QCDs lower an individual’s adjusted gross income (AGI)

Since Congress frequently bases additional taxes and benefit limitations on AGI or modified adjusted gross income (MAGI)—which comes in various forms as modifications of AGI—this reduction can trigger cascading tax benefits. Traditional itemized deductions for charitable giving, state taxes, and mortgage interest don’t provide this same AGI reduction.

More than a dozen significant tax provisions hinge on AGI or MAGI levels, including Medicare’s high-income surcharges (IRMAA) and the 3.8% net investment income tax. Under Trump’s tax legislation, several deductions—including those for state and local taxes, seniors, tips, overtime pay, and car loan interest—are all calculated based on MAGI thresholds.

By lowering these critical income measurements, QCDs can help donors avoid these additional taxes and preserve access to income-sensitive deductions, multiplying the tax benefits well beyond the immediate charitable deduction.

Unlike a traditional tax deduction, the reduction in taxable income from a Qualified Charitable Distribution (QCD) isn’t tied to whether a filer itemizes or takes the standard deduction—it’s available to all

This strategy can be especially valuable for baby boomers who face substantial taxable IRA withdrawals. By directing donations through QCDs, retirees can reduce their reported income, which in turn may help them avoid higher Medicare Income-Related Monthly Adjustment Amount (IRMAA) surcharges—thresholds that can rise with as little as one extra dollar of income.

The Wall Street Journal profiled Brad Kerr, a retired procurement manager outside Chicago, who has embraced QCDs for their tax efficiency. Upon becoming eligible, Kerr donated $10,000 through QCDs and plans to increase that to $25,000 once required minimum distributions begin.

“QCDs let us give generously to our charities using funds we’d have to withdraw anyway—without adding taxable income,” he explained.    

Mr. Kerr noted that he and his wife are currently in the 22% tax bracket. By making their charitable gifts through QCDs, they can reduce their adjusted gross income (AGI). That, in turn, may allow them to claim more of the megabill’s $12,000 senior deduction—since both are over age 65—and potentially steer clear of costly Medicare IRMAA surcharges. 

Here’s more you need to know about Qualified Charitable Distributions (QCDs). For additional details, see IRS Publication 590-B.

Key Rules for QCDs

Understand the Basics: In 2025, each IRA owner who is at least 70½ years old can make QCDs of up to $108,000, meaning a couple could potentially donate up to $216,000. The funds must be transferred directly from the IRA to a qualified charity. This means you cannot withdraw the funds yourself and then send them later. QCDs cannot be made to donor-advised funds or for donations where you receive a substantial personal benefit, such as a gala ticket with a meal. However, small items like mugs or tote bags are permitted.

Timing and Process Matter

Pay Attention to Timing: The first dollars withdrawn from an IRA for the year count as your Required Minimum Distribution (RMD). For example, if you have a $30,000 RMD and withdraw that amount before doing a $5,000 QCD, the QCD will be allowed but won’t count toward satisfying your RMD. To avoid this issue, experts recommend making QCDs before taking any other required withdrawals.

Check the Giving Process: There are several ways to complete a QCD:

• Have the IRA sponsor send a check directly to the charity.
• Have the sponsor send you a check made payable to the charity, which you can then deliver yourself.
• Some sponsors even provide a special checkbook for making QCDs.

For the donation to count in the current tax year, it must typically be processed by December 31st.

Documentation and Tax Breaks

Get the Proof: Just as with any other donation, you must obtain a written acknowledgment from the charity for any QCD of $250 or more before filing your tax return. This letter must state that no goods or services were provided in exchange for your donation.

Don’t Miss the Tax Break! A common issue with QCDs is that donors forget to account for them and miss their tax break. This is because the IRS Form 1099-R lumps QCDs in with all other taxable IRA withdrawals. It’s up to you to subtract the QCD amount when you file your taxes to ensure you receive the proper tax benefit.

Conclusion

Earlier this year, the IRS addressed the reporting gap by requiring IRA sponsors to separately identify QCD amounts on Form 1099-R using a new “Code Y,” beginning with the 2025 tax year. This will give both filers and tax preparers a clear record of QCD activity.

However, the Securities Industry and Financial Markets Association (SIFMA), a major financial trade group, has pushed back, calling the rule an unnecessary burden. While the requirement may ultimately stand, its effective date could be delayed until 2026 to allow institutions more time to adjust.

In the meantime, continue to keep your own careful records of any QCDs. For detailed questions about taxes and retirement planning feel free to reach out to Huckabee CPA for a complimentary consultation about your situation.