Donate From Your IRA and Keep More of Your Money Away From the IRS
Why Donating Directly From Your IRA Makes More Financial Sense
As we move through tax season, I'm noticing that many new retired clients are missing out on an easy tax-strategy that is costing them thousands in unnecessary taxes. If you're 70½ or older and charitably inclined, or have parents who are, I want to share one of the most tax-efficient giving strategies available today: Qualified Charitable Distributions (QCDs) from your IRA.
What is a QCD?
A Qualified Charitable Distribution allows individuals aged 70½ or older to donate up to $108,000 in 2025 directly from their Individual Retirement Arrangement (IRA) to qualified charities without counting that money as taxable income5,3. This is an increase from the $105,000 limit in 20241, which itself was up from $100,000 in previous years.
For married couples where both spouses qualify and have separate IRAs, the combined donation limit can be as high as $216,000 in 2025.
Why QCDs Beat Writing a Check After Taking a Distribution
1. Lower Your Taxable Income
When you take a distribution from your IRA, that money typically counts as taxable income. But when you make a QCD, the funds go directly from your IRA to the charity, bypassing your income entirely4. This means the distribution won't increase your Modified Adjusted Gross Income (MAGI), potentially keeping you in a lower tax bracket.
2. Satisfy Your Required Minimum Distribution (RMD)
If you're 73 or older, QCDs count toward your Required Minimum Distribution1. Instead of taking the RMD, paying taxes on it, and then writing a check to charity, you can satisfy your RMD obligation while supporting causes you care about—all without the tax hit.
3. Benefit Even If You Don't Itemize Deductions
Since the Tax Cuts and Jobs Act nearly doubled the standard deduction ($30,000 for married couples filing jointly in 20253), many people no longer itemize their deductions. With a QCD, you get the tax benefit whether you itemize or not4. The money never shows up as income, so you don't need a deduction to offset it.
4. Potentially Lower Medicare Premiums
Your MAGI determines your Medicare Part B premiums. By keeping distributions out of your income through QCDs, you might avoid crossing income thresholds that would trigger higher Medicare premiums4.
5. Reduce Social Security Taxation
Lower income can also mean less of your Social Security benefits are subject to taxation4.
How to Make a QCD
To make a QCD, contact your IRA trustee and request a direct transfer to your chosen qualified charity. (Or, if you're our client, contact us and we'll take care of the rest.) The IRS emphasizes that you should do this well before year-end to ensure the transaction completes in time1. Remember that you'll need documentation from the charity confirming the contribution date, amount, and that no goods or services were received in exchange1,2.
Planning for 2025
For 2025, the QCD limit will increase to $108,000 due to inflation adjustments3,5. For those interested in life-income gifts, you can also make a one-time election to contribute up to $54,000 from your IRA to fund a charitable gift annuity or charitable remainder trust5.
The Bottom Line
Writing a check to charity after taking an IRA distribution might seem simpler, but making a QCD directly from your IRA offers significant tax advantages. It's a win-win that allows you to support the causes you care about while potentially lowering your tax bill.
As always, I recommend consulting with your tax advisor about your specific situation before making any financial decisions.
2 https://www.psca.org/news/psca-news/2024/11/irs-reminds-ira-owners-of-charitable-donation-rules/
3 https://blog.pgcalc.com/irs-announces-tax-schedules-and-exemptions-for-2025
5 https://giftplanning.aarp.org/give-from-your-ira