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The Story of Bill and Ruth - QCD: Saving Taxes When You Don't Itemize Deductions
Only about 10% of tax filers itemize their deductions. The remaining filers claim the standard deduction because it is larger than the total of their itemizable deductions. For example, in 2025 the standard deduction for a couple, both aged 70, is $46,700. Bill and Ruth, both 75, no longer make mortgage payments on their residence, and their other deductions fall short of $46,700 - so it is not worthwhile for them to itemize. Does this mean they will derive no tax savings from their charitable gifts, which total $10,000 during the year? Actually, no, if they make their gifts with their IRAs. They have reached the age when they are required to take mandatory IRA distributions. Thus either could authorize his or her IRA administrator to transfer $10,000 to a charity. They will reduce their taxable required distribution by $10,000, and this will be equivalent to deducting $10,000 for a cash contribution. Such transfers are known as qualified charitable distributions (QCDs). |
