Start the Year with Smart Giving: The Benefits of Qualified Charitable Distributions 

When planning your charitable giving for 2025, January is the ideal time to consider Qualified Charitable Distributions (QCDs) from your IRA. QCDs allow individuals aged 70½ or older to make tax-efficient charitable contributions directly from their IRA, bypassing taxable income while satisfying required minimum distributions (RMDs). This strategy can provide a significant tax advantage, especially for those who no longer itemize deductions due to the high standard deduction. 

Timing is crucial when making a QCD. To maximize the tax benefits, the QCD must be made before taking your RMD. If you take your RMD first, the QCD cannot offset that taxable income, leaving you with a higher adjusted gross income (AGI) and potentially higher taxes. For example, if you make your QCD early in the year, it can fully satisfy your RMD requirement while remaining tax-free. This strategic timing reduces AGI, which can help mitigate “stealth taxes,” lower Medicare surcharges, and increase eligibility for other AGI-based tax benefits. 

If you are charitably inclined, QCDs provide an impactful way to support causes you care about while enhancing your financial plan. They also play a key role in estate planning by reducing the taxable funds left to heirs. Remember, QCDs must be direct transfers to qualifying charities, and each IRA owner has an annual QCD limit of $100,000 (indexed to $108,000 for 2025). 

For personalized guidance on incorporating QCDs into your financial strategy, especially with proper timing to maximize their benefits, feel free to reach out to Keystone today. 

Source: Investment News, December 16, 2024