Why Qualified Charitable Distributions Matter More Than Ever

With the ongoing economic and legislative shifts, you’ll want to use every tool available to advise your philanthropic clients. The One Big Beautiful Bill Act (OBBBA) is motivating many attorneys, CPAs, and financial advisors to focus on charitable planning techniques for tax benefits and achieve the charitable impact that is important to their clients. 

One of the top tools on the list for clients 70 ½ and older is the Qualified Charitable Distribution (QCD). With nearly $17 trillion held in IRAs by 44% of U.S. households, advisors can’t ignore Qualified Charitable Distributions, which allow an individual to transfer up to $108,000 (2025 limit) from an IRA directly to an eligible charity.  

QCD rules themselves won’t change under the OBBBA, but QCDs may become even more relevant considering other changes under the OBBBA. That’s because QCDs are excluded from income entirely, which means they directly reduce your client’s AGI—unlike itemized charitable deductions. This is very important under the OBBBA, which will continue to impact the number of people who itemize deductions, especially seniors.  Below are details:

• Under the OBBBA, the standard deduction for the 2025 tax year is $15,750 for single filers and $31,500 for married couples filing jointly. 
• Note that single filers 65+ receive an additional $2,000 as part of the age-based extra deduction. On top of that, the OBBBA introduces a new “Senior Bonus” deduction of $6,000, available from 2025 through 2028. Altogether, this means a single filer aged 65 or older may be eligible for a total standard deduction of $23,750, subject to phase outs starting at income levels of $75,000 (for single filers).
• QCDs count toward required minimum distributions (RMDs) without increasing taxable income a key tax planning advantage. 
• By lowering AGI, QCDs can help control Medicare premium surcharges (IRMAA) and preserve other credits or deductions that phase out with increasing income.
• Not only is the standard deduction increasing for 2025, but also, beginning in 2026, the OBBBA imposes a new 0.5% of AGI floor for deducting charitable contributions and also limits the tax benefit of charitable deductions for individuals in the top income brackets by capping the value of those deductions at 35%, even if the taxpayer’s actual marginal tax rate is 37%.

The bottom line is that many of your retiree clients may find that their ability to benefit from itemized charitable deductions declines even further under the OBBBA. QCDs can help. 

Reach out to Hudson Community Foundation’s team to help your client gift a QCD to a field-of-interest, designated, or unrestricted fund. Although donor-advised funds are not eligible to receive QCDs, we work with many families to establish other types of funds alongside their donor-advised funds to maximize QCD opportunities while also supporting the causes they care about. We look forward to a conversation!

The team at the HCF looks forward to working with you and your clients to establish (or update) bequests to fulfill your clients’ charitable legacies. Give us a call! 

With a fund at Hudson Community Foundation (HCF), advisors can manage the charitable assets on their preferred platform at any amount. Assets stay under your management. You can provide your clients with the consistent investment advice they expect. We are your partner in charitable giving!

The team at HCF is a resource as you serve your philanthropic clients. We understand the charitable side and are happy to serve as a secondary source as you manage the primary relationship with your clients. This blog is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.