MW If you're over 70, you might have missed this key tax break on Giving Tuesday
By Beth Pinsker
There's still time to make use of this strategy before the end of the year to lower your RMD
If you're over 70 and giving to charity, it's time to learn about QCDs.
On Giving Tuesday this year, some 38 million people donated $4 billion in a single day, according to the organization that has sponsored the annual event since 2012. Generosity is always its own reward, but in the U.S., there are also tax advantages to giving-if you follow the complicated rules.
This week, most older Americans likely missed out on one of the best tax breaks in the IRS code because they pulled out their checkbooks or fired up their credit cards to give money, instead of carefully planning ahead.
A more tax-efficient way to give is to call Fidelity, Vanguard or wherever you hold your IRA, and have them send the money directly to your intended recipient from your IRA. It's an extra step, but well worth it if you're giving to charity anyway and you're also concerned about your income level for the year. Individuals over the age of 701/2 can make what are known as qualified charitable distributions (QCDs) of up to $108,000 in 2025 and $111,000 in 2026.
Using a QCD will lower, dollar for dollar, a person's required minimum distribution $(RMD)$ for the year. The RMD is the amount the government says you have to start taking out of tax-deferred retirement plans once you hit the age limit, which is now 73, and pay tax on that amount as income. So if your RMD is $50,000 and you give $50,000 to charity through a QCD, you have met your threshold and do not have to incur any taxable income from your retirement accounts. This can then have ripple effects to lower the taxation of your Social Security benefits, keep them from Medicare's IRMAA surcharges and make it easier to qualify for things like medical expense deductions.
This makes the most impact at high wealth levels, where people are not using their retirement accounts for living expenses but have to take the money out anyway. Nevertheless, QCDs can still help when the numbers are in the hundreds instead of tens of thousands. For 2025 and 2026, having a lever to control income is especially important because it could help seniors qualify for the $6,000 bonus deduction, which starts to phase out above $75,000 in modified adjusted gross income for single filers and $150,000 for married couples. If you're close to the cliff, a well-timed charitable deduction could keep you within the parameters.
Just note that "well-timed" is the key part of that process, because this is not a decision you can make in April just before the tax-filing deadline. QCDs need to be processed by the receiving charity by Dec. 31, which often means sending them out earlier in December to make sure there's time for the paperwork to go through.
There's a lot of fine print on QCDs, but as more financial advisers and retirees become aware, they've been using the process. Fidelity has seen a 579% increase in the number of QCD transactions from 2020 to 2024, making then the fastest-growing category.
A lot of this is due to the growth of the baby-boomer population that has entered their RMD years, which Fidelity says is up over 46% in that same time frame. "There are just more people in that phase of life," said Rita Assaf, vice president of retirement savings at Fidelity. "This is a generation with huge balances in 401(k)s, and there's a hunger to better predict retirement withdrawal and its impacts on income, IRMAA and Social Security taxes."
Even with huge increases, the number of people making QCD transactions still covers just a fraction of the charitable giving done by baby boomers and the Silent Generation, who account for about 70% of all giving, according to the Blackbaud Institute for Philanthropic Impact.
For the most part, people are still writing out checks and making credit-card donations from their general cash flow. But this is another one of those numbers that should be 100%. If you're over 701/2 and are giving to charity, no matter your income, you're likely best off doing a QCD above any other method of claiming a tax deduction, because it directly reduces your income.
The key awareness people need to have is that the money needs to go directly from the IRA to the charity. If it ever ends up in their own hands in between, it doesn't count as a QCD and the tax benefits wash away. "In order to have a QCD, you have to meet the requirements," said Jere Doyle, senior vice president at BNY Mellon. "You have to do a direct transfer, and a lot of people don't realize that."
Other choices for charitable tax breaks in 2025 would be the new $1,000 above-the-line charitable deduction per individual, which would be comparable in terms of the effect on impact, but would not reduce your IRA account balance and therefore would not help you mitigate future RMDs and taxable income. If you are among the 10% who still itemize rather than take the standard deduction, which is $15,750 for 2025, you can still do that the "regular" way in 2025, or even bunch up years of donations to make that useful. In 2026, there will be limitations to how much you can deduct for giving. Again, neither of these reduce your IRA balance or RMD for future years.
How to do a QCD
There are a couple of tips for making QCDs, since it does require extra effort:
-- You can put in an electronic request with some custodians, like Fidelity, which Assaf said activates a menu feature for QCDs once the customer reaches 701/2. It would be just like initiating a trade or a transfer of funds, and all you have to do is fill in the information for the receiving charity, including a mailing address.
-- Make sure you keep documentation. In the current system, it's the individual's responsibility to keep track of their QCD details. If you donate in increments, you need to make sure you don't go over the yearly limit allowed. You'll be issued a 1099-R by the custodian, but the form may not list an identifying code that makes it clear to the IRS that this was not a taxable distribution. There's a new code, J, Assaf said, but it's not widely used yet.
-- Some IRA custodians allow check writing from the account, which would allow you to send a check yourself to the charities, but you need to make sure that the receiving charity and the custodian are aware that your donation is intended as a QCD so the IRS is notified. Digital transactions, like debit or credit cards, are not available in most cases. If your intended charity only takes these forms of payment, you may have to contact them to see if they will accept a check from your custodian.
-- Make sure the charity processes your donation in time. If they cash your check in January, your donation will count toward the following tax year, and that could mess up your careful tax planning.
"It's not too late," said Fidelity's Assaf. "You might have missed it for Giving Tuesday, but you have until Dec. 31. If you still have to take an RMD, as most people do in December, there's an opportunity."
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December 04, 2025 12:56 ET (17:56 GMT)
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