Charitable Giving Strategies – A Few Ideas

Qualified Charitable Distribution (QCD) – What are They? 

If you are retirement-aged and are concerned about the tax implications of taking your Required Minimum Distribution (RMD) or perhaps you have enough other sources of income this year, you might want to consider a Qualified Charitable Distribution, or QCD for short. If that sounds like you, please consider a tax-wise strategy to make a gift to GROW? 

If you are age 70 ½ or older, you can use a Charitable IRA Rollover/QCD as an effective, and tax-savvy, way to fulfill the IRS requirement for people 73 and older to take their (RMDs). If you don’t take them, you could be subject to stiff IRS penalties. 

A QCD allows an IRA administrator to send up to $111,000/year (all or part of your annual RMD) to a charity, or charities of your choice (excluding donor-advised funds), thus not negatively impacting your Social Security payment and Medicare benefit. 

Couples who submit married filing jointly status tax returns, each qualify for annual QCDs of up to $111,000, for a potential total of $222,000.  

How does this work?  

The IRA assets go directly to GROW, or other charities, so you don't report QCDs as taxable income and you don't owe any taxes on the QCD, even if you don’t itemize deductions. 

Some donors find that QCDs provide greater tax savings than cash donations for which charitable tax deductions are claimed. This is because their adjusted gross income (AGI) is reduced, as the AGI is used in several key calculations, such as determining the taxable portion of Social Security benefits or what deductions and credits donors qualify for receiving.  

Not all assets owned are treated the same when passed to heirs. In fact, a unique feature of traditional IRAs is that heirs pay income taxes on the inherited assets at their own income tax rate at the time of withdrawal. 

This unique tax feature is why public charities can be ideal beneficiaries of IRA assets. Public charities, including donor-advised funds (DAFs), do not pay income tax on IRA income, which means every penny of the donation can be directed to support your charitable goals. 

Naming a charitable beneficiary is easy to do and may result in substantial tax savings for a donor's heirs and estate.  

Here are some great resources about Donor Advised Funds (DAFs) – why rebuild the ark when these very popular funds have great explanations of all the ways you can use them?  

Charles Schwab’s DAF360: https://www.dafgiving360.org/  

Fidelity Charitable Fund https://www.fidelitycharitable.org/articles.html 

And, for a non-profit organization’s wide-ranging resources about estate planning, please see: www.leave10.org for a wealth of information about making a will, leaving some or all of what you will leave behind to the charity, or charities of your choice, and still allow you to make sure you have enough resources to last for the rest of your life/lives. It’s not either family, or charity…it can be both! 

GROW does not provide tax, or legal advice, this information is provided to encourage you to consider this strategy and contact your own advisors before making this type of gift.