Contributed by: Lauren Adams, CFA®, CFP®
At Center for Financial Planning, one of our favorite ways to improve lives is by helping our clients make a positive impact on the world through what we call “tax-savvy charitable giving.” While many people give charitably by writing a check, digging into their wallets for cash, or putting a donation on their credit cards, we’re here to tell you there’s a better way! There are a number of key strategies we can deploy to help our clients’ charitable dollars stretch even further while also lowering their tax burden.
Donating Directly From Your IRA
This strategy involves a concept called the Qualified Charitable Distribution (QCD). How does it work? Instead of taking a distribution from your IRA, paying taxes on the amount withdrawn, and then sending that money to your checking account, QCDs allow you to send money directly from your IRA to the charity of your choice. In essence, it’s a transfer of assets from your IRA to one or more qualified nonprofits.
But there are some caveats: You need to be at least 70.5 years old and the charity has to be a 501(c)(3), meaning a tax-exempt nonprofit where all of its earnings support the advancement of its charitable cause. Also, there are limits on how much you can give each year—but that number is quite high (in 2025, it’s up to $108,000 per person per year).
Usually, distributions from your IRA are taxed when they’re received. But with a QCD, they become tax-free as long as they’re transferred to an eligible nonprofit organization. Giving directly from your IRA results in those dollar amounts not being included in your gross income for that year, which results in a lower tax bill for you. It can also lower the amount you may pay for Medicare premiums and the portion of Social Security that is taxable to you, depending on your situation and your income level.
For those of you who have reached the milestone age, a QCD also counts toward satisfying the distributions you must take each year for your Required Minimum Distribution, the amount the government makes you withdraw from your IRA each year once you hit a certain age (generally, 73-75). This is especially useful if you don’t need your full RMD to live on or if you planned to give charitably anyhow (now you’re doing so in a more tax-efficient manner!).
Other tactics to consider are: Gifting Securities Instead of Cash and Exploring Donor Advised Funds. Check out our blog for more information on these tax-savvy strategies: https://www.centerfinplan.com/money-centered/category/Charitable+Giving.
These are just a few of the strategies we recommend for our clients. But regardless of the strategy employed, one thing is always true for us at The Center: Helping our clients get the most bang for their charitable buck is one of the many reasons why we love what we do!
Lauren Adams, CFA®, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She works with clients and their families to achieve their financial planning goals.
Any opinions are those of the author and not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making a decision, and it does not constitute a recommendation. All opinions are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.
Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.
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