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How to use QCDs for charitable giving in retirement

QCDs Just Got Smarter Under the New Tax Law

Have you been wondering how to use QCDs for charitable giving in retirement? QCDs (Qualified Charitable Distributions) are one of the more underused tools in charitable and retirement planning, and thanks to recent changes in the tax code, they’ve become even more valuable.

Halfway to 71: The strangest birthday in finance just got a lot more rewarding

No party hats, no singing, no sheet cake with uneven frosting. Just a low-key milestone with big implications: turning 70½. That odd little half-birthday is when something unique happens—you become eligible to make a Qualified Charitable Distribution (QCD) from your IRA.

It’s not the kind of thing most clients celebrate, but your Theia advisor absolutely pays attention. QCDs are one of the more underused tools in charitable and retirement planning, and thanks to recent changes in the tax code, they’ve become even more valuable. So here’s how to use QCDs for charitable giving in retirement.

What happens at 70½, exactly?

At exactly 70 years and six months old, you can begin directing money from your traditional IRA to a qualified charity using a QCD. It’s a move that, when done correctly:

Keeps that donation out of your taxable income
Counts toward satisfying your Required Minimum Distribution (RMD) at age 73 and beyond
Helps reduce adjusted gross income (AGI), potentially keeping Medicare premiums and other income-based costs down

It’s a rare thing: a tax strategy that’s simple, clean, and beneficial for both the donor and the cause they care about.

Why QCDs are suddenly back in style

Thanks to the One Big Beautiful Bill Act, QCDs got an indirect glow-up. The law didn’t name them specifically—it just changed the playing field around them. Here’s how:

Standard deductions went up.
With fewer taxpayers itemizing deductions, many charitable gifts no longer reduce taxable income. A QCD changes that by bypassing the deduction entirely—donations made through QCDs are excluded from income, even if the donor takes the standard deduction.
MAGI matters more.
Many new or expanded tax benefits for older adults phase out quickly once modified adjusted gross income climbs past a certain point. By using a QCD to lower income, clients may preserve eligibility for credits or deductions—like the $6,000 senior deduction (or $12,000 for joint filers).‍
RMDs are looming—and fully taxable.
Starting at age 73 or 75, IRA withdrawals become mandatory and taxable. If you are charitably inclined, using QCDs to meet RMD requirements is an efficient way to reduce tax exposure without reducing generosity.

In short, recent tax changes didn’t just make itemized giving less effective—they unintentionally made QCDs a much more powerful strategy.

The key rules at a glance

You must be at least 70½: Not 70. Not “turning 71 this year.” Literally 70 years and six months old.
The limit is $108,000 in 2025: Per person, per year, indexed for inflation. Married couples can each give up to their own limit.
IRA only: 401(k)s and similar plans don’t count. Funds must come from an IRA (or from a 401(k) rolled into an IRA first).
Direct transfer required: The money must go directly from the IRA custodian to the charity—no pit stops in your checking account.
Qualified charities only: No donor-advised funds, private foundations, or anything offering personal perks (so, no gala dinners or tote bags).
The deadline is December 31: The charity must receive the funds before year-end for the QCD to count for that tax year.

Let’s talk about Carol

Carol is 75, retired, and has a sizable IRA. Every year, she donates to her community’s food pantry. But now her RMD has grown large enough to push her into a higher tax bracket—and bump up her Medicare premiums.

If Carol simply takes her RMD, pays tax on it, and then donates what’s left, a decent chunk goes to the IRS first. But if she uses a QCD instead—directing $25,000 from her IRA to the food pantry—the entire gift skips her taxable income. Her AGI stays lower, she meets part of her RMD, and the charity gets the full amount without tax deductions.

It’s a smart move that lets Carol continue giving while keeping more of her income shielded from taxes.

When QCDs don’t make sense

QCDs aren’t the answer for everyone. If you are under 70½, the option simply isn’t available yet. Also, if you’re still contributing to your IRA after age 70½, those deductible contributions could affect how much of your future giving qualifies as a QCD.

Still, if you’re already in the habit of annual giving, QCDs often make the process cleaner and more effective.

Planning beyond the birthday

Most people don’t mark 70½ on their calendar. But they should. It’s the point when giving becomes not just a kind act—but a strategic one.

If you’re interested in how to use QCDs for charitable giving in retirement, or finding out other ways Theia Financial breaks the mold for financial planning in retirement, schedule a complimentary Strategy Session today!