Individuals with traditional IRAs generally are mandated to start taking required minimum distributions (RMDs) after they reach age 73. However, they have the option of making qualified charitable distributions (QCDs) to their favorite nonprofits to satisfy their RMDs. This tax allowance provides several benefits for donors and, of course, can be beneficial for charities.

History of QCDs

QCDs were first established by the Pension Protection Act of 2006. Their availability was extended several times, eventually becoming permanent as a result of the Protecting Americans from Tax Hikes Act of 2015. The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act upgraded QCDs by indexing annual distribution limits for inflation, starting in 2024. As a result, donors are now able to make greater QCD donations over time.

In 2025, eligible donors can transfer up to $108,000 per year directly to a qualified charity if they’re at least age 70½ ($216,000 for married couples filing jointly if both spouses are age 70½ or older). QCDs aren’t deductible, but they’re removed from taxable income and count toward RMDs, if applicable. QCDs can be especially beneficial to taxpayers who don’t have enough total itemized deductions to benefit from claiming the charitable deduction or whose deduction would be reduced due to adjusted gross income limits.

Split-interest entities 

The SECURE 2.0 Act also provided donors with a new way to make QCDs: through a split-interest entity — a charitable remainder unitrust (CRUT), charitable gift annuity (CGA) or charitable remainder annuity trust (CRAT). Split-interest entities generally allow donors to make gifts while also creating income streams for themselves. After a designated period of time, the balance goes to their named charities.

These QCDs are subject to a lower limit but still adjusted annually for inflation. The 2025 limit is $54,000. Spouses can each make a donation to the same split-interest entity to double a gift. However, taxpayers are limited to one such distribution per lifetime, and only a donor and donor’s spouse can be income beneficiaries.

The split-interest entity must pay a 5% minimum fixed percentage for the life of the donor or the donor’s spouse, and those payments must begin within one year of funding. The payments are taxed as ordinary income to the beneficiary.

Boost donations

How can you get the word out and boost donations? Consider preparing a presentation, brochure or both on how QCDs work, stressing the tax advantages for donors. A QCD might be especially tax-smart for donors who:

• Can’t benefit from the charitable deduction because their total itemized deductions for the year won’t exceed the standard deduction for their filing status, or
• Want to donate more to charity during the year than they can deduct due to adjusted gross income (AGI)-based limits on their charitable deduction. In general, deductions for cash gifts to public charities can’t exceed 60% of AGI and deductions for donations of long-term capital gains property to charities can’t exceed 30% of AGI.

But don’t limit your education campaign to these technicalities. Supporters increasingly are interested in outcomes. Be as specific as possible about how you’ll apply a donor’s QCD — for example, to fund a new program or facility or pay for additional staff.

Qualified recipients

Note that donor-advised fund sponsors, private foundations and supporting organizations continue to be ineligible as QCD recipients. Indeed, you should make certain that your nonprofit is allowed to accept — and is set up to receive — QCDs. Contact us at the form below or visit our related service page for help.

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