IRAs allow qualified owners to make Qualified Charitable Distributions (QCDs) in which an individual transfers funds from an IRA directly to a qualified charity. The benefit of this transaction is that the IRA distribution is not taxable which in effect is the same or better as a tax deduction of the same amount. This strategy can be beneficial for those who want to make charitable contributions but do not qualify for a tax deduction because they do not have enough itemized deductions to file a Schedule A with their income tax returns and instead claim the standard deduction. Those who claim the standard deduction get no Federal tax benefit from making charitable contributions.
In order to qualify to make a QCD, the taxpayer must be at least Age 70.5.
The 2025 QCD limit (the maximum that can be distributed to charity) increased from $105,000 in 2024 to $108,000 per taxpayer. Therefore, a married couple can exclude up to $216,000 in taxable income by transferring their IRA directly to a qualified charity. Donations from an IRA to a Donor Advised Fund do not qualify as QCD.
It is important to review your annual distributions and desired charity amounts, as well as other charitable vehicles, to make sure you are achieving the most tax efficient outcome.