Tax-Efficient Giving with Qualified Charitable Distributions

Justin Lopez March 11th, 2024

If you envision your financial legacy leaving a lasting impact, consider using your Required Minimum Distributions (RMD) for charitable donations. This strategy can not only help you mitigate your tax liability, but also turn this financial obligation into a meaningful contribution to society.

If you hold a traditional IRA, you’re obligated to start making RMDs once you hit the age of 73. These withdrawals are taxed as ordinary income, potentially catapulting you into a higher tax bracket—a concerning scenario for many in their retirement years.

However, the Qualified Charitable Distribution (QCD) rule is a strategy that may help you put these distributions to good use. By channeling your RMD directly to a charity, you will be able to exclude the donation from your Adjusted Gross Income (AGI) and potentially reduce your taxable income. The IRS caps this tax-exempt charitable giving at $100,000 per year, offering a sizeable opportunity for tax savings.

Once you decide to make a QCD, choose a charity that qualifies under IRS rules and then inform your IRA custodian to transfer the intended amount directly to the organization. This process is crucial since QCDs must be made directly from your IRA. If the distribution is paid to you first, you may forfeit any tax advantages.

Remember that this blog is for informational purposes only, so before initiating or modifying a charitable giving strategy, consider consulting with your financial and tax professionals.

If you have questions about QCDs or would like to discuss how they could fit into your broader financial strategy, please don’t hesitate to reach out.

Read More By Justin Lopez, AIF®

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Investment advisory services are offered through Concord Wealth Partners, an SEC Registered Investment Advisor.

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