DAF in 2025?
Client will be 70.5 in 2026 (both are over age 65 in 2025), and eligible to make QCDs. Their itemized deductions in 2024 totaled $32,674. They may be less in 2025. They contribute to their church every year, and last year was $14,400. In light of the new charitable rules from the OBBBA, I am considering that they make a contribution to a DAF from his IRA in 2025 for two years of contributions, about $29,000. The DAF contribution would bring itemized deductions to about $50,172 for 2025. Beginning next year, I will recommend he contribute to his church via a QCD. This way he can avoid the .5% floor for charitable deductions and get an extra deduction for 2025 due to he DAF contribution. We might make a small Roth conversion in 2025 to take advantage of the greater deductions as long as his other itemized deductions pan out. Your thoughts or ways to improve the strategy?
Permalink Submitted by Alan - IRA critic on Thu, 2025-09-11 14:36
This will work as you expected, assuming that the extra 2025 DAF donation does not replace the 2026 donation, done via QCD.
The real tax savings will be realized at age 73 when RMDs begin, as the QCD will reduce some of the added AGI caused by the RMD. QCDs done prior to RMDs have no current tax impact, but will reduce the future IRA balance and therefore reduce future RMDs.
Note that both spouses will be eligible for the new senior bonus deduction unless their AGI penetrates the 6% phaseout threshold. Itemized deductions will not reduce AGI, just taxable income.