YEAR-END GIVING IS HERE

Now is a great time to think about an IRA charitable gift (also known as a qualified charitable distribution (QCD). A charitable gift made from an IRA may help reduce or eliminate income tax on your 2025 tax return.

A QCD allows you (70½ years and older) to directly contribute from an IRA to a qualified charity without it counting toward your taxable income. For 2025, the maximum annual distribution amount that can qualify for a QCD is $108,000. If you’re a joint tax filer, both you and your spouse can make a $108,000 QCD from your own IRAs, for a potential total of $216,000. If you are age 73 or older and are required to take an RMD from your traditional IRA, this charitable distribution can satisfy your RMD for the year.

As always, consult your tax or financial advisor before undertaking any financial decisions.  

Here are some things to consider:

  1. IRA Required Minimum Distribution – If you are 70 ½ years or older and have a traditional IRA, you must take a required minimum distribution (RMD) and pay income tax on the distribution. As you grow older, your RMD amount and your taxes usually increase. Once traditional IRA owners reach their mid to late 80’s, they sometimes find themselves taking large distributions which then requires them to pay significant income taxes. With larger IRAs, many owners maximize tax-free growth by waiting until the end of the year to take their RMD.
  2. IRA Charitable Rollover – A good way to avoid paying income tax on distributions from traditional IRAs is to make a gift to charity directly from your IRA. The Internal Revenue Service (IRS) refers to the IRA charitable rollover as a qualified charitable distribution (QCD). An individual over 70½ is permitted to make a QCD from his or her IRA to a qualified charity. The QCD is not included in taxable income. If the IRA owner is over 73, the distribution may also fulfill part or all of their RMD.

Eligible types of IRA accounts for QCDs include traditional and rollover IRAs, inherited IRAs, SEP IRAs (inactive plans only), and SIMPLE IRAs (inactive plans only).

For individuals who don’t need the funds from their RMD, QCDs offer a unique opportunity to optimize the tax benefits of giving.

  1. How to Make a QCD Gift – Many custodians require a QCD to be paid from a money market account or similar fund. Because many individuals have invested their IRAs in stocks, bonds or other securities, it may be necessary to exchange the IRA stock or bond accounts for a money market fund prior to the distribution. Because the equity markets are at high levels, some individuals may choose to transfer funds from equities to a money market fund now to prepare for their IRA charitable rollover.
  2. Rules on the IRA Charitable Rollover – There are some limits to using the IRA rollover as a charitable gift. The IRA owner must be at least 70½ and the maximum transfer amount in 2025 is $108,000. The transfer must be to a qualified exempt charity and may be designated for a specific purpose or field of interest fund. However, QCDs may not be to a donor advised fund or a supporting organization. In addition, QCDs may not be used for a ticket to a charity dinner or other event that involves a partial benefit to the donor because it is required that the entire QCD be for a qualified charitable purpose.

Sources: Crescendo – Major & Planned Gift Marketing, October 2025 & Fidelity Investments

Your IRA charitable gift/QCD can help UCP Central PA fulfill its mission of empowering people of diverse abilities to live a meaningful life through innovative support and services. Please consider your year-end gift today. And as always, be sure to consult your tax or financial planner before making any financial decisions.