IRA Giving After Age 70 ½: How to Make a Qualified Charitable Distribution
As a former CPA with over 40 years of experience, our observation is that people are very generous with the donations they make. People typically donate cash, write a check to the charity, or put the donation on their credit card. Now, let’s explore another technique that all Average Joe’s should consider. This is one of the 6 Easy Ways a Financial Advisor Can Add Value.
Qualified Charitable Distribution
In addition to traditional giving methods, the federal tax code has a provision that allows another option for mature taxpayers in how they can make charitable donations. Charitably inclined individual over age 70½ who have an IRA have an additional option available to them. Individuals over age 70½ can exclude from income up to $108,000 in 2025 in IRA distributions made directly to a qualified public charitable organization. The original amount was $100,000, and it increases over time based on inflation.
This is a Qualified Charitable Distribution (“QCD”). A qualified QCD requires the distributions go directly to a qualified public charitable organization. This typically includes non-profit organizations recognized by the IRS under code section 501(c) (3). A 501(c) (3) organization pursues religious, charitable, or scientific purposes. Donors who make charitable contributions, not QCD’s, to these organizations get a federal income tax deduction if they itemize their deductions. A qualified public charitable organization however does not include contributions made to donor advised funds, private foundations and supporting organizations.
No Double Benefit
Understand however that there is no double benefit allowed. If an IRA distribution qualifies for a QCD, then there is no charitable donation deduction. A QCD from an IRA may count towards the annual Required Minimum Distribution (“RMD”). See below as the QCD must come out before the RMD. QCD’s made after the RMD are not qualified and therefore not eligible.
Taxpayers aged 73 must begin to withdraw annually from their IRA and 401(k) accounts. IRA’s and 401(k)’s are tax deferred accounts. Contributions are tax deductible. The funds in the IRA or 401(k) plan grow through the years tax-free. Distributions are taxable as ordinary income. The IRS has a table to calculate how much to distribute. Most folks will use IRS Table III (Uniform Lifetime). The annual required amount is based on your age and the market value of the account from the prior December 31st balance.
The amounts are distributed over your life expectancy. Keep in mind the RMD is the minimum amount that must be withdrawn. If you need or want to, you can always take our more. Just be cautious:
You do not want to outlive your assets.
Taking your RMD is crucial. Failing to take your RMD will result in a penalty of 25% of the required amount. You read that right – it is not a typo. The penalty is 25%. Make sure you are taking your RMD annually.
Why should you consider doing this? There are seven reasons to consider this strategy:
1) The Standard Deduction
Taxpayers choose between taking the standard deduction or itemize their deductions, whichever gives them the greater benefit. The standard deduction for 2025 is $15,750 for single filers and $31,500 for married couples filing a joint return.
One major itemized deduction is for state income and property taxes. This is known as SALT (State and Local Tax). The SALT deduction limit was $10,000. In July 2025, President Trump signed One, Big, Beautiful Bill Act (OBBBA). This has temporarily increased the SALT deduction to $40,000 through 2029. In 2030, it reverts to $10,000. Here is How the New SALT Deduction Can Save You Taxes.
The other major categories of itemized deductions are mortgage interest and charitable donations. Taxpayers who do not itemize their deductions are not getting any income tax benefit from their charitable donations. Before this legislation, 90% of income tax returns filed use the standard deduction. 1)
Making a QCD from an IRA avoids having this included in taxable income and taxing it.
2) Itemized Deductions
For taxpayers who do itemize their deductions, they may be subject to limitations on their charitable deductions. The first limit is that in 2025, cash donations (including checks and amounts put on your credit card) cannot exceed 60% of adjusted gross income (“AGI”). In 2026, this will revert to 50% of AGI.
Appreciated property donations cannot exceed 30% of AGI. Appreciated property is property that is worth more than your cost basis. Your cost basis is what you paid for an asset. For example, if you bought Amazon for $10,000 and it was worth $15,000 when you donated it, this is appreciated property. If you inherit property your cost basis is the market value of the asset on the date of death of the person that passed away.
Any donations, cash or appreciated property made over the respective AGI limit, carries forward and deducted over the next five years.
3) Lowering AGI
By making a QCD, AGI will be lower as this IRA distribution is not included in income. This may increase the allowable number of medical deductions and miscellaneous itemized deductions as these deductions are limited as a percentage of AGI. Medical deductions become deductible when they exceed 7.5% of AGI.
4) Possibly Reduce the Taxable Portion of Social Security Benefits
A QCD from an IRA reduces gross income and may be reducing the taxable portion of any Social Security benefits. Social Security benefits may be taxable. For a married couple filing a joint return they will have their Social Security benefits taxable when their modified adjusted gross income exceeds $32,000. When the income exceeds $44,000 up to 85% of your Social Security benefits are taxable.
5) Reduce State Income Tax
Thirty-One states income tax is initially based on AGI. Then states make various adjustments to this. Therefore, taxpayers making a QCD may also be reducing their state income tax.
The starting point for the State of Connecticut Income tax is Federal AGI. There are then adjustments made to this to arrive at Connecticut Taxable Income. For a married couple filing a joint return in Connecticut with AGI of $100,000 their Connecticut income tax rate is 5%. This rate goes up to 6.99% for couples with earnings over $500,000.
6) Reduce Your Taxable Estate
By making a QCD, the distribution is out of your estate. The federal estate and gift tax exemption in 2025 is $13.99 million per individual. This means that someone can leave up to this amount and not pay any federal estate tax. A married couple that uses “portability” can effectively shelter $13.99 million times two or $27.98 million from federal estate tax.
The recent OBBBA legislation increased this exemption to $15 million per person beginning in 2026.
With proper planning most people will not be subject to the federal estate tax. However, people may still be subject to a state estate tax. In Connecticut, the state estate tax exemption in 2025 is also $13.99 million. The rate starts at 7% and runs up to 12%.
The OBBBA just passed. We will see if Connecticut increases its exemption to $15 million per individual also. Our neighboring states of New York, Massachusetts and Rhode Island have significantly lower exemptions. So, while most taxpayers will not be subject to the federal estate tax, they still need to be very cognizant of any state estate tax.
7) Reduce Future RMD’s
QCD’s made that exceed your annual RMD will reduce future RMD’s. As mentioned earlier the RMD is based on the market value of the account from the prior December 31st. If you take out more than the RMD, by doing QCD’s, this will reduce the value of the account and therefore reduce future RMD’s.
Words of Caution
First, to be eligible for a QCD, you must be over age 70 ½. Note, it was not long ago when RMD’s began at age 70 ½. This is no longer the case. In 2025, you do not need to start taking your RMD’s until age 73. Beginning on January 1, 2033, the age is age 75.
So, if you start taking QCD’s at age 70 ½, just be aware that it will not count towards your RMD. This is because you do not have an RMD at age 70 ½ anymore. It will only apply if you do QCD’s when you are age 73 and older.
Second, if you are aged 73 and older and make QCD’s, and you want them to count against your RMD, the QCD’s must come out first.
Is this strategy effective for every donation you make? Not likely. We advise clients to just use this approach for any material donations you made. What’s material?
Well, like other things in life, it depends.
Our approach has been to advise clients if they are going to donate $1,000 or more to one charity to consider doing a QCD. For donations of under $1,000 it is easier to donate cash, write a check or put it on your credit card.
Action Item
If you are considering a QCD, please, do not wait until the end of the year. Paperwork will need to be prepared and processed with your IRA custodian. At year end, custodians get remarkably busy, and this process may take longer than you think. If you are interested in a QCD, start the process no later than early December to assure you will have all your paperwork done in good form. People who are eligible for this strategy should take a hard look at it.
If you need assistance with IRA Giving After 70 ½: How to Make a Qualified Charitable Distribution, give Thomas Scanlon, CPA, CFP® a call at (860) 645-1515 or E-mail Thomas.scanlon@raymondjames.com
This article is original content written by Manchester, CT Financial Advisor Thomas Scanlon, CFP®, CPA.
This article originally appeared on November 8, 2023, and has been updated.
1) bipartisanpolicy.org – April 10, 2025
Any opinions are those of Thomas F. Scanlon and not necessarily those of RJFS or Raymond James. All opinions are as of this date and are subject to change without notice. Raymond James does not offer tax or legal advice and services. You should discuss any tax or legal matters with the appropriate professional.
RMD’s are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Contributions to a traditional IRA may be tax-deductible depending on the taxpayer’s income, tax-filing status, and other factors. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty.