Maximizing Charitable Impact Through Qualified Charitable Distributions
Posted by Robert Ingrasci on June 18, 2025
Qualified Charitable Distributions (QCDs) offer a powerful and tax-efficient way for individuals with traditional IRAs to support nonprofit organizations. As the U.S. tax code continues to evolve, recent legislative updates—particularly through the SECURE 2.0 Act—have expanded the utility and flexibility of QCDs, making them an increasingly valuable tool for both donors and charitable organizations.
Understanding QCDs and Their Origins
QCDs were first introduced under the Pension Protection Act of 2006 and became a permanent part of the tax code through the Protecting Americans from Tax Hikes (PATH) Act of 2015. These provisions allow individuals aged 70½ or older to make direct transfers from their traditional IRAs to qualified charities. These transfers count toward the individual’s Required Minimum Distributions (RMDs) but are excluded from taxable income—providing a significant tax benefit, especially for those who do not itemize deductions.
Key Benefits for Donors and Nonprofits
For 2025, individuals can contribute up to $108,000 annually via QCDs, or $216,000 for married couples filing jointly if both spouses are eligible. While QCDs are not deductible as charitable contributions, they reduce adjusted gross income (AGI), which can help donors avoid higher Medicare premiums, reduce the taxation of Social Security benefits, and preserve other tax deductions and credits.
This makes QCDs particularly attractive to:
- Retirees who no longer itemize deductions
- High-income individuals seeking to manage AGI
- Donors looking to make impactful gifts without increasing their tax burden
New Opportunities Through Split-Interest Entities
The SECURE 2.0 Act introduced a new dimension to QCDs by allowing one-time transfers to split-interest entities such as:
- Charitable Remainder Unitrusts (CRUTs)
- Charitable Remainder Annuity Trusts (CRATs)
- Charitable Gift Annuities (CGAs)
These arrangements allow donors to make a charitable gift while retaining an income stream for themselves or their spouse. For 2025, the limit for such a QCD is $54,000, adjusted annually for inflation. While this option is limited to one lifetime distribution per individual, it provides a unique way to blend philanthropy with retirement income planning.
Key requirements include:
- The income beneficiary must be the donor or the donor’s spouse
- The split-interest entity must pay a minimum of 5% annually
- Payments must begin within one year and are taxed as ordinary income
Educating and Engaging Donors
Despite the advantages, many eligible donors remain unaware of QCDs or the recent enhancements. Nonprofits can play a critical role in raising awareness by:
- Creating educational brochures and website content
- Hosting informational sessions or webinars
- Partnering with financial advisors and estate planners to inform potential donors
By proactively educating their donor base, nonprofits can unlock new streams of giving while helping supporters achieve their financial and philanthropic goals.
Final Thoughts
QCDs represent a win-win for donors and nonprofits alike. With expanded limits and new giving vehicles introduced by the SECURE 2.0 Act, there’s never been a better time for nonprofits to promote this strategy. By understanding the rules and effectively communicating the benefits, organizations can strengthen donor relationships and secure more sustainable funding.
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Bob is an experienced tax professional who devotes his professional time to structuring tax strategies in the areas of compliance, consulting, and planning. Bob works closely with a broad range of high-net-worth individuals and multi-generational families, specializing in the areas of gift and estate planning, charitable gift planning, trust and estate administration, individual taxation, and wealth preservation. Bob serves as a practice leader in the Family Wealth and Estate Planning group. Bob joined Lumsden McCormick in 2008 and was named partner in 2022.