Bread and Butter Strategy: QCDs for Clients 70½ and Older
by SCF Team | November 10, 2025 | Siouxland Community Foundation Blog, Advisor Resources |
As the financial and legislative landscape evolves, advisors are sharpening every tool to help clients meet both financial and charitable goals. Recent provisions in the One Big Beautiful Bill Act (OBBBA) have renewed interest in strategies that merge tax efficiency with meaningful community impact. Among the most powerful tools for clients aged 70½ and older is the Qualified Charitable Distribution (QCD).
Why QCDs Matter
IRA assets in the U.S. now total nearly $18 trillion, and most clients likely have at least one IRA. Yet, traditional IRAs can be among the least tax-efficient assets to pass on. Withdrawals are generally taxed as ordinary income, often pushing retirees into higher brackets once required minimum distributions (RMDs) begin at age 73.
On top of that, IRAs are fully included in the owner’s taxable estate, so heirs may face both estate and income taxes when they inherit them. This double taxation can quickly erode value, making IRAs one of the most expensive assets to transfer compared to other holdings.
That’s where QCDs shine. A Qualified Charitable Distribution allows individuals aged 70½ or older to transfer up to $108,000 in 2025 directly from an IRA to an eligible charity. The result? Clients can support meaningful causes while reducing taxable income and fulfilling charitable intentions in a highly efficient way.
Why QCDs Are Especially Relevant Now
Here’s why QCDs are more important now than ever:
- While the OBBBA doesn’t change QCD rules directly, it does make them more valuable. Because QCDs lower Adjusted Gross Income (AGI) rather than acting as itemized deductions, they remain advantageous even as fewer taxpayers itemize, especially among older adults.
- A QCD can satisfy RMD requirements without increasing taxable income. This dual benefit helps clients support charitable causes while managing Medicare IRMAA surcharges, preserving deductions and credits that phase out as AGI rises.
- Starting in 2026, under the OBBBA, the IRS will apply a 0.5% AGI floor for charitable deductions and cap the value of those deductions at 35% for high-income earners (even if their top marginal rate is 37%). The result: high-income clients will see reduced benefits from traditional itemized charitable deductions, making QCDs even more powerful.
Structuring QCDs Through the Siouxland Community Foundation
The Siouxland Community Foundation can help you and your clients use QCDs to support causes that align with their values. Clients can direct QCDs to a field-of-interest, designated, or unrestricted fund, ensuring flexibility while maximizing tax efficiency.
While donor-advised funds (DAFs) cannot receive QCDs, many families maintain both: a DAF for flexible, long-term giving and another fund designed to receive QCDs. This combination creates a comprehensive charitable strategy that supports near-term generosity and future legacy goals.
Now is an ideal time to revisit these strategies with your clients. By incorporating QCDs into year-end planning, you can help them give meaningfully, reduce tax exposure, and continue making a tangible difference in the Siouxland community.
