Commentary · Commentary

Tax Saving Tips for Seniors: Making the Most of Charitable Giving

Written by the William Allan team · Published 2025-09-15

For many retirees, giving back to the community is a core value. What some may not realize is that certain forms of charitable giving can also provide significant tax advantages. If you are at least age 70½ and hold an eligible IRA, a qualified charitable distribution (QCD) could be worth exploring. QCD eligibility starts separately from the age when an owner’s required minimum distributions (RMDs) begin.

What’s a Qualified Charitable Distribution?

A QCD is an otherwise taxable distribution paid directly from an eligible IRA to a qualifying charity after the owner or beneficiary reaches age 70½. Ongoing SEP and SIMPLE IRAs do not qualify. The eligible amount can be excluded from income, subject to annual limits and a reduction for certain deductible IRA contributions made at age 70½ or later.

The distribution still must be reported on the federal tax return. The excluded amount cannot also be claimed as a charitable deduction. Compared with taking the same amount as a taxable IRA withdrawal, a qualifying QCD keeps it out of adjusted gross income (AGI). IRS Publication 590-B explains eligibility and reporting.

Why Lowering AGI Matters

Keeping an otherwise taxable IRA distribution out of income can affect other parts of a return and benefit calculations. Results depend on the household’s other income and the applicable thresholds:

• Medicare Premiums (IRMAA): A QCD may help limit income-based Part B and Part D surcharges. The calculation generally uses AGI plus tax-exempt interest from two years earlier, so a current-year gift does not ordinarily change this year’s premium. The Social Security Administration’s premium guidance explains the income review.

• Taxes on Social Security: Keeping the IRA amount out of income may reduce the share of benefits subject to tax. That depends on the combined-income calculation, which also includes tax-exempt interest and half of Social Security benefits.

• Avoiding Higher Tax Brackets: Keeping taxable income lower helps minimize the chance of being pushed into a higher bracket.

Key Tips for Using QCDs Effectively

• Meet the Age Requirement: You must have reached age 70½ when the distribution is made. If you already have an IRA RMD, an eligible QCD can satisfy some or all of it. Owner RMD starting ages depend on birth year, and inherited accounts have separate rules.

• Mind the Limit: The exclusion limit was $108,000 per eligible person for 2025. For 2026, it is $111,000, as shown in the IRS 2026 retirement-limit notice. Spouses with separate IRAs each have their own limit if each is eligible; later-year limits may change with inflation.

• Coordinate with RMDs: A qualifying direct IRA gift can count toward an applicable RMD. Withdrawing money payable to yourself and then making a personal gift does not turn the withdrawal into a QCD or undo a prior taxable distribution.

• Ask About Recurring Giving: Some custodians offer recurring direct charitable distributions from eligible IRAs. Confirm the service, recipient instructions, and timing with your custodian, and track whether the payments satisfy the QCD rules and any applicable RMD.

• Consider Itemization Separately: The QCD income exclusion is available to eligible taxpayers whether they itemize or take the standard deduction. It keeps qualifying IRA income out of AGI rather than adding a deduction.

• Qualified Charities Only: Donor-advised funds, supporting organizations, and most private foundations are ineligible. Confirm the recipient’s QCD eligibility before making a transfer.

• Get Documentation: Be sure to obtain a receipt or acknowledgment letter from the charity confirming no goods or services were received in exchange for the gift.

Putting It Into Perspective

Qualified Charitable Distributions aren’t just about tax efficiency. They allow retirees to support causes they care about while also making required IRA withdrawals work harder. For many, it’s a way to align financial goals with personal values.

The Bottom Line

For seniors looking to combine generosity with smart tax planning, QCDs can be a powerful tool. They won’t be right for everyone, but in the right situation, they can reduce taxable income, help manage healthcare costs, and maximize the impact of charitable giving.

As always, it’s important to work with your tax advisor before implementing any strategy to ensure it fits your unique circumstances.

This commentary is for informational purposes only and is not investment, tax, or legal advice. All investing involves risk, including the possible loss of principal, and past performance does not guarantee future results.