Qualified Chartiable Distribution (QCD)
What is it? A distribution made directly from an IRA to a public charity.
Advantages: QCDs satisfy required minimum distributions without counting as ordinary taxable income. That can make it easier for tax filers to use the standard deduction and can prevent additional Medicare premiums.
Disadvantages: QCDs are limited to $100,000 per year (indexed with inflation starting in 2024) and are only possible after age 70½.
When to use it: QCDs might be especially useful if you are reluctant to draw from your traditional IRA because of the potential tax liability or if you currently use funds drawn from your IRA for giving.
Gifts of In-Kind Assets
What is it? Rather than gifting cash, this strategy makes a gift of an in-kind donation of marketable securities, capital assets or life insurance.
Advantages: Appreciated property may potentially be deducted at fair market value, potentially allowing the donor to avoid capital gain taxes on the disposition.
Disadvantages: The charity might not always accept assets, and even if they do, an appraisal might be required. Donated assets might need to be used by the charity to fully use the deduction. Any assets subject to debt are treated as a bargain sale.
When to use it: This strategy might be useful to anyone who has low-basis assets. It can be especially easy and beneficial when using appreciated stock or mutual funds.
Bunching of Tax Deductions in a Single Year
What is it? The timing of deductions to occur in select years rather than spread out over multiple years to better take advantage of allowed deductions.
Advantages: This strategy ensures the donor can fully utilize the charitable income tax deduction in set years and the standard deduction in others.
Disadvantages: It could make annual giving more difficult unless used in conjunction with another vehicle, such as a donor advised fund.
When to use it: Although this strategy can be used with many of the tools listed here, bunching can be especially useful in conjunction with a donor advised fund.
I'm Interested! Where do I start?
At Baird, we help clients understand strategies like Qualified Charitable Distributions (QCDs) and In-Kind donations. These approaches can be useful for supporting causes that matter to you, including religious and charitable organizations. If you're working with a financial planner, they can help you decide if donating from your IRA makes sense. Our team is also available to answer questions or talk through options if you'd like to learn more.
