Seven things you should know about QCDs

With major tax law changes on the horizon, 2025 offers donors a unique window to maximize both generosity and financial benefit. By making strategic charitable gifts this year—especially through Qualified Charitable Distributions—donors can support the causes they care about while taking advantage of current tax rules before they change in 2026.

“There could be significant benefits in making a larger gift in 2025, before the new tax laws kick in,” said Ginger Mlakar, Cleveland Foundation, Senior Vice President, Philanthropic Strategy and General Counsel.

1. 2025 offers a unique giving opportunity before new federal tax law changes take effect in 2026.

2. Qualified Charitable Distributions (QCDs) allow individuals age 70½+ to give directly from retirement accounts—up to $108,000 per person or $216,000 per couple—tax-free. Here's how it works: individuals can donate from their IRA retirement account to a qualified charity and the dollars withdrawn from their retirement account will not be treated as taxable income for federal or Ohio income tax purposes.  In other words, it is totally tax-free. 

3. QCDs count toward Required Minimum Distributions (RMDs) and can reduce taxable income. Because a QCD avoids federal and state income taxes, your client can make charitable donations to charities while avoiding higher income tax brackets. 

4. QCDs can also establish long-term funds at the Cleveland Foundation, such as designated or field of interest funds.

5. Timing matters: donors must be 70½ or older on the date of distribution for it to qualify. Additionally, if they are 73 years or older and required to take a minimum distribution, commonly referred to as RMD, from their IRA account, a QCD can satisfy their RMD requirement while not increasing their taxable income.

6. 2026 tax law changes will affect charitable deductions. Nonitemizers can deduct up to $1,000 ($2,000 for couples) in cash gifts. Itemizers must give more than 0.5% of AGI for gifts to be deductible. The tax benefit of charitable deductions will be capped at 35%.

7. Bottom line: Donors considering larger gifts may benefit most by giving in 2025.