If you're age 70½ or older and making charitable donations directly from your IRA, big changes are coming your way in 2025. The IRS has updated how Qualified Charitable Distributions (QCDs) are reported—and it's important to understand how this impacts your tax planning.
At BDA Financial, we want to keep you ahead of the curve so you can continue to give wisely and efficiently.
🚨 What's Changing in 2025?
Historically, QCDs were reported the same as regular IRA distributions on IRS Form 1099-R. It was up to taxpayers (and their tax preparers) to properly report the QCD on their tax return to avoid paying taxes on it.
Starting in 2025, custodians will be required to:
Clearly identify QCDs separately on Form 1099-R, you will find QCDs with a code Y
Report the total amount of QCDs made during the year, alongside regular taxable distributions
This change should reduce errors and confusion during tax season—especially for retirees who use QCDs to offset their Required Minimum Distributions (RMDs).
💡 Why This Matters
QCDs are a powerful charitable giving strategy. They allow IRA owners aged 70½ and older to donate up to $108,000 per year (per individual in 2025) directly to qualified charities—tax-free. This annual limit is indexed for inflation.
✅ For married couples filing jointly, each spouse can make a QCD of up to $108,000 from their own IRA—meaning a combined potential impact of $216,000 in tax-free giving.
These donations can also count toward your annual RMD, making them a valuable tax-saving tool.
With the new rules:
You’ll get cleaner, more transparent reporting from your IRA custodian
Your tax preparer can more easily distinguish taxable vs. non-taxable distributions
It lowers the risk of accidentally paying tax on a donation that should be tax-free
🧾 Planning Ahead
Although the rule takes effect in 2025, now is a great time to:
Review your current charitable giving plan
Consider whether QCDs will play a role in your 2025 RMD strategy
👥 We’re Here to Help
At BDA Financial, we work closely with clients to integrate smart giving strategies like QCDs into their retirement and tax planning. If you’re unsure whether a QCD is right for you—or want to make sure you're prepared for the 2025 changes—let’s talk.