If you hold funds in a traditional IRA and regularly support charitable causes, there is a powerful, yet often overlooked, tax strategy that can help you save money while maximizing your giving.
For some time, individuals aged 70½ and older have been able to transfer funds directly from a traditional IRA to an IRS-approved charity. But now, with the recent One Big Beautiful Bill Act (OBBBA), this strategy is more beneficial than ever.
- If you’re 70½ or older and interested in a smart giving strategy, here’s what you need to know:
What Makes QCDs So Advantageous Now?
Usually, every dollar you withdraw from a traditional retirement account is taxed as ordinary income. However, once you reach age 70½, you can utilize a Qualified Charitable Distribution (QCD).
- A QCD allows you to donate money directly from your traditional IRA to an eligible charity.
- Crucially, this distribution does not count as taxable income, helping you lower your Adjusted Gross Income (AGI).
For example, if you make a $5,000 withdrawal for personal use, that money is added to your taxable income. But if you send that same $5,000 as a QCD directly to a charity, your taxable income is not impacted.
The Basic QCD Rules
To ensure your gift qualifies as a tax-free QCD, please follow these four key requirements:
- Age Requirement: You must be age 70½ or older when the distribution is made.
- Direct Transfer: The funds must be paid directly from your IRA trustee to a qualifying charity (like The Journey Home). Donor-advised funds and most private foundations are ineligible.
- Taxable Distribution: The distribution must be one that would otherwise be taxable (which is typical for traditional IRA funds).
- No Benefits Received: The donation must meet the tax-law requirements for a 100% deductible charitable donation (i.e., you cannot receive any personal benefits in return).
Important Limit: For 2025, the annual maximum you can transfer via QCD is $108,000. If your spouse also has an IRA, they have a separate $108,000 limit.
Is a QCD Right for You?
You may benefit significantly from this strategy if one or more of these profiles apply to you:
- You plan to take the standard deduction instead of itemizing.
- You want to reduce your taxable income to avoid higher tax brackets, IRMAA, NIIT, or other income-based tax consequences.
- You want to satisfy your RMD in the most tax-efficient way possible.
A Qualified Charitable Distribution is an exceptional way to support The Journey Home while making a profoundly positive impact on your tax situation.
We encourage you to speak with your tax advisor or IRA administrator today to determine whether a QCD is the best strategy for your giving goals. They can provide personalized guidance and help you arrange a direct transfer to The Journey Home.