The
QCD IRA, also known as a
Legacy IRA, generated a significant volume of
tax-advantaged charitable gift annuities (CGA) in 2024. It is most often funded with
tax-free Qualified Charitable Distributions (QCD) of Required Minimum Distributions (RMD) from an IRA as a way of taking RMD amounts tax-free.
2024 was the second year of the Act. Individuals were able in 2024 to withdraw up to $53,000 of their Required Minimum Distributions (RMD) from their IRAs
tax-free to establish
QCD CGAs for themselves (and/or their spouses). Those QCD CGAs pay income for life/lives at generous fixed annuity rates.
Many individuals waited until the end of 2024 to take advantage of this opportunity. Others inquired about the
QCD CGA but were not ready to act. The IRA-Legacy Act limited the tax-free IRA withdrawal for a QCD CGA in 2024 to a total of $53,000 ($106,000 if both spouses have IRAs). As a result, some individuals and their planners decided to wait until 2025 to get a clearer picture of the risk/reward.
In 2025, the maximum amount that can be withdrawn from an IRA tax-free for a QCD CGA has been increased to
$54,000.
This is an opportunity to take
tax-free withdrawals of RMDs to fund gift annuities, which will pay you high fixed-rate income for life.
Please note that in exchange for taking a $54,000 tax-free withdrawal in 2025 from your IRA for a QCD CGA, there will be no income tax charitable deduction (which has no impact if you do not itemize deductions), and the annual annuity amount will be taxed as ordinary income.
Also
, note that you can only establish one or more
QCD IRAs in a single calendar year up to the maximum amount. There is no carryover
, nor can you establish additional
QCD IRAs after that year under current law.
AFHU is pleased to provide a confidential calculation of your 2025 QCD CGA at no cost or obligation.
For more information, please contact us at
plannedgiving@afhu.org or 212.607.8524.
