The Tax Blotter is a round-up of recent tax news and Tax Court rulings.
Certain individuals can transfer a “qualified charitable distribution” (QCD) from an IRA to a charity without any adverse tax consequences.
Wash out taxes.
The tax law carves out a special exception for senior citizens. If an individual age 70½ or older transfers a QCD directly from an IRA to a qualified charitable organization, the withdrawal is 100% exempt from federal income tax. No income tax deduction is available either, but many of these folks don’t itemize anyway. Thus, the transaction is a virtual “wash” for tax purposes. The maximum QCD allowed is $100,000 per eligible individual ($108,000 in 2025). So, a married couple could withdraw up to $216,000 tax-free in 2025.
Meet RMD obligations.
Currently, individuals who have attained the age of 73 must take required minimum distributions (RMDs) from their IRAs. The RMDs are taxed at ordinary income rates reaching as high as 37% in 2025. But QCDs count as RMDs as far as the IRS is concerned. Thus, you can transfer RMD funds directly from your IRAs to qualified charitable organizations without paying a penny of tax on the payouts. Note: This strategy doesn’t work for qualified plans like 401(k)s.
Split the gift.
Recent tax legislation has provided more flexibility for charitable-minded seniors. Under XECURE 2,0, an eligible individual can include a once-in-a-lifetime time gift of up to $50,000 ($54,000 in 2025) to a charitable remainder trust (CRT) or charitable gift annuity (CGA). Unlike the usual QCD, this “split interest gift” benefits IRA owners personally. Although a portion goes to charity, up to 90% of the transferred value may be paid to the IRA owner over a term of up to 20 years or their lifetime. Note: This gift counts toward the $100,000 limit ($108,00 in 2025). Certain individuals can transfer a “qualified charitable distribution” (QCD) from an IRA to a charity without any adverse tax consequences.
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Tags: Income Taxes, IRS, Taxes
