How retirees can get bigger tax breaks on charitable gifts using QCDs

If you’re 70 1/2 years old or older, you can contribute up to $108,000 in 2025. If a married couple files jointly, a spouse age 70 1/2 or older can also transfer up to $108,000 from an IRA. Thanks to changes enacted by the Safety Act of 2022, QCD limits now adjust annually for inflation.

Here are some other important things to know about QCDs and how this move can benefit retirees.

When you file your taxes, you claim the greater of the standard deduction or itemized deductions. The standard deduction for 2025 is $15,750 for single filers and $31,500 for married couples filing jointly.

Itemized deductions may include limited tax deductions for things like charitable contributions, medical expenses, and state and local taxes.

However, most taxpayers are unable to claim the charitable deduction because 90% of filers do not itemize, according to the latest IRS data.

Although there is no tax deduction for a QCD, “it’s better than a deduction because the amount distributed is excluded from income,” CFP Juan Ross, a partner at Forum Financial Management in Thousand Oaks, Calif., previously told CNBC.

QCD does not increase adjusted gross income (AGI). AGI can increase Medicare Part B and Part D premiums as revenue increases. Lowering AGI would also minimize the phase-out of other tax cuts and benefit cuts enacted by President Donald Trump’s “Big and Beautiful Bill,” experts say.

Another benefit of a QCD is that the transfer can reduce your annual required minimum distribution (RMD).

Most retirees are required to take RMDs from their pre-tax retirement accounts starting at age 73 or face IRS penalties. The first deadline is April 1st of the year after you turn 73 years old, and subsequent deadlines are December 31st.

Depending on the size of the account, RMDs can be a headache for some retirees. RMDs are calculated based on your previous year-end balance and the IRS’s “life expectancy factor.”

QCD can be a great way to meet philanthropic objectives without increasing AGI, says CFP Jim Guarino, managing director of Baker Newman Noise in Woburn, Massachusetts. He is also a certified public accountant.

“For my philanthropic clients, it’s hardly a challenge,” he says.