IRA Charitable Contribution Strategies

Combining tax savings and philanthropy

As we enter this season of giving, you might wonder how you can donate to charitable organizations while also gaining a simple tax benefit. Luckily, for those who have reached the required minimum distribution (RMD) age, qualified charitable distributions, or QCDs, combine these two advantages. So whether you need to take an RMD by year's end—or are planning ahead for 2026—a QCD could be worth considering.

QCD essentials

Although qualified charitable distributions have been around for nearly 20 years, they have gained prominence in recent years as more people start using QCDs. Here are some key provisions to consider before deciding if a QCD is right for you.

• You must be at least age 70½. Even though the RMD age has increased to 73, QCDs still require you to be at least 70½. Once you reach this age, you are eligible—regardless of whether you are required to take a distribution yet. You don’t have to be the original IRA owner; you can also make a QCD from an inherited or beneficiary IRA..
• The QCD limit for 2025 is $108,000. You can choose to make any part of your RMD a QCD—or even surpass your RMD amount. (The 2026 limit rises to $111,000.) As you can see, this generous limit enables, for example, a married couple to donate over $200,000 to charities—and avoid taxation on all of it..
• The QCD must be paid directly to the charity. The IRS prohibits QCD distributions directly to the IRA owner, even if the owner plans to donate the assets to the charity. Instead, a check must be written in the name of the charity, and any electronic transfer must go directly to the charity. If you want to deliver or mail a check to your chosen charity, you can do so as long as you do not have “constructive receipt” of the assets. Since the IRA owner cannot cash a check payable to the charity, there is no constructive receipt.
• You must keep good records. Just like any other charitable donation, you should obtain a receipt for the QCD and keep it with your tax records in case you need to prove that you made the charitable contribution..
• The receiving organization must be eligible. Most donations from an IRA to a charity qualify as QCDs, but IRA contributions to donor-advised funds and most private foundations do not. Your IRA custodian will not determine whether a recipient of your IRA funds is an eligible charity, so seek sound tax advice if you have questions about whether your chosen entity qualifies. 

• You must report your QCD on your tax return. Although you do not have to pay income tax on a QCD, you must report it to the IRS, which provides clear instructions on how to report IRA distributions as QCDs.

   

Why use a qualified charitable distribution?

In short, a QCD allows individuals to receive a charitable deduction without having to itemize their deductions on a tax return. They can claim the standard IRS deduction and also exclude their QCD from taxation. Since most U.S. taxpayers do not itemize deductions, using the QCD approach enables many older Americans to make sizeable donations while keeping their tax filings simple.

Although this next reminder might seem obvious to some, it’s worth repeating: since Roth IRA distributions are generally not taxed, QCDs are usually made from Traditional IRAs. While there’s no rule prohibiting Roth IRA QCDs, it often doesn’t make sense. People who qualify for a QCD—that is, those who are at least age 70½—would also qualify for a tax-free Roth IRA distribution if they have owned the Roth for at least five taxable years. As a result, QCDs are almost always made from Traditional IRAs.

Plan for year end—and for the future

Even if you have already met your 2025 RMD, you might consider using a QCD for your future distributions. Most charities are happy to accept a donation in January rather than waiting until December. The timing of your IRA distributions and other QCD rules should be reviewed after seeking solid advice. Once you decide on a course of action, STRATA’s self-directed IRA experts are ready to help expedite your transactions.