Too many acronyms - breaking down common tax questions after the OBBBA

If your head is spinning, it’s for a good reason! IRA charity rules were already complex before the introduction of the One Big Beautiful Bill Act (OBBBA). Here are five common questions from attorneys, CPAs, and financial advisors as you guide charitable clients.

"Did the new tax laws change Qualified Charitable Distribution rules for clients over 70½? “I have a lot of clients who are 70 ½ and older.”

This is a great question, and it’s super important. The short answer is no–the One Big Beautiful Bill Act did not directly change the IRS’s rules for Qualified Charitable Distributions, or “QCDs.” Through a QCD, a taxpayer who is over the age of 70 ½ can direct up to $108,000 (2025 limit) from an IRA to an eligible charity, including some types of funds at Kitsap Community Foundation.

“I can tell there’s more to the story. What else should I know to best guide my clients who are 70½ and older?”

QCDs are even more beneficial after the One Big Beautiful Bill Act, as they bypass the new 0.5% adjusted gross income floor (effective in 2026) for itemized charitable deductions. Additionally, QCDs avoid the 35% cap on deduction value for high-income taxpayers and reduce taxable income directly without requiring itemization, making them especially useful for retirees.

“When should I call Kitsap Community Foundation if I have a client who is a good candidate for a QCD?”

Anytime! At KCF, several types of funds are eligible recipients of Qualified Charitable Distributions: field-of-interest funds, which support specific causes or issue areas; designated funds, which provide ongoing support to particular nonprofits; and unrestricted funds, which allow us to address the community’s most pressing needs. Please note that, under IRS rules, a donor-advised fund is not eligible to receive QCDs. However, our team can help you and your client set up an additional qualified fund, in addition to an existing donor-advised fund, and develop an overall strategy to meet both financial and community impact goals.

“Remind me again why IRAs are such powerful legacy gifts to charity?”

IRAs are an effective way to make legacy gifts to charity. Contributions to traditional IRAs may be tax-deductible, and account assets grow tax-deferred. When left to charity at death, the assets avoid income tax and estate tax, since the charity can withdraw them tax-free, and charitable bequests are deductible from the taxable estate.

“Does the whole QCD have to go directly to the charity?”

No! A special type of QCD allows your client to make a “split interest” gift to either a charitable remainder trust (CRT) or charitable gift annuity (CGA). The 2025 per-taxpayer limit for this so-called “legacy IRA” is $54,000. Note that the CGA option may be the most attractive option for your clients due to the significantly greater administrative burdens associated with setting up a CRT.

Please reach out to us at any time to start a conversation about crafting a charitable giving plan tailored to your client's needs. Together, we can ensure your clients achieve their charitable goals through QCDs and make a lasting community impact.