QCDs Just Got Smarter Under the New Tax Law

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 advisors should absolutely pay 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.

What happens at 70½, exactly?

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

• Keeps that donation out of their taxable income
• Counts toward satisfying their 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, IRA withdrawals become mandatory and taxable. For charitably inclined clients, 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

1. You must be at least 70½: Not 70. Not "turning 71 this year." Literally 70 years and six months old.
2. The limit is $108,000 in 2025: Per person, per year, indexed for inflation. Married couples can each give up to their own limit.
3. 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).
4. Direct transfer required: The money must go directly from the IRA custodian to the charity—no pit stops in your checking account.
5. Qualified charities only: No donor-advised funds, private foundations, or anything offering personal perks (so, no gala dinners or tote bags).
6. 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 Jim

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

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

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

When QCDs don't make sense

QCDs aren’t the answer for every client. If someone is under 70½, the option simply isn’t available yet. Clients who like to delay decisions or support multiple charities may find the irrevocable nature of QCDs inconvenient—once the distribution is made, it’s final.

Also, if a client is still contributing to their IRA after age 70½, those deductible contributions could affect how much of their future giving qualifies as a QCD. Advisors should review contribution and distribution activity closely.

Still, for retirees already in the habit of annual giving, QCDs often make the process cleaner and more effective.

Planning beyond the birthday

Most clients 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.

For advisors, this milestone opens new doors to charitable, estate, and retirement planning conversations. It’s a natural time to discuss legacy goals, tax exposure, RMD strategies, and how to align all of that within a single, compliant framework.

How Estate Guru Helps Advisors Navigate It All

At Estate Guru, we’ve built a platform that takes the stress out of charitable and estate planning—especially when complex tax rules come into play.

With built-in compliance, attorney-reviewed logic, and state-specific documents, advisors can:

• Manage charitable gifts, trusts, and beneficiaries from one centralized tool,
• Stay confident in legal accuracy with licensed attorney support baked in,
• Keep estate plans updated as tax laws evolve,
• And deliver value to clients without drowning in paperwork.

QCDs may seem like a niche tactic, but for the growing number of retirees hitting the 70½ milestone, they represent a real chance to give back while staying ahead of tax obligations.

When done right, they’re a tool that helps advisors deepen client relationships, support causes that matter, and make every dollar go further—both now and in the years to come.