As year-end approaches, many individuals look for ways to reduce their taxable income while giving back to causes they care about. One effective strategy for charitable giving is the Qualified Charitable Distribution (QCD) from an Individual Retirement Account (IRA). A QCD allows individuals who are 70½ years or older to transfer funds directly from their IRA to a qualified charity, offering a range of financial and philanthropic benefits. Below are some of the advantages.
Reduce Your Taxable Income
One of the most compelling reasons to utilize a QCD is its ability to lower your taxable income. Normally, when you take a distribution from an IRA, it is considered taxable income. However, with a QCD, the amount transferred directly to a charity is excluded from your gross income.
Satisfy Your RMD Requirements
If you’re over the age of 73, the IRS mandates that you take a minimum distribution from your IRA each year. The QCD can be used to meet this requirement. For example, if your RMD for the year is $10,000, you can make a QCD donation of that amount directly to a qualified charity. This is particularly beneficial for individuals who don’t need the funds from their RMD and wish to give back to charity.
Maximize Charitable Deductions
Normally, charitable donations are deductible on your tax return only if you itemize your deductions. However, a QCD allows you to make charitable contributions even if you don’t itemize deductions. Because QCDs are not included in your taxable income, they effectively allow you to donate to charity while not needing to take the extra step of itemizing deductions. This is especially beneficial for taxpayers who take the standard deduction, which has been higher since tax law changes in 2018.
Increase Your Charitable Giving Power
Since QCDs reduce your taxable income, you could potentially save money on taxes, which can allow you to give more to charity. The funds that would have gone toward paying taxes can instead be directed to a cause that matters to you and help you make a larger gift than you initially anticipated.
Taking the Next Step
A Qualified Charitable Distribution (QCD) is a powerful tool for charitable giving, especially for individuals over 70½ years old. Not only can a QCD reduce your taxable income, satisfy your RMD requirements, and allow for more generous giving, but it can also help minimize tax liabilities and increase the impact of your donations. It’s always a good idea to consult with a financial advisor or tax professional to ensure it aligns with your specific financial goals. If you’re considering charitable giving strategies, a QCD is worth exploring as part of your overall tax and philanthropy plan with Sun Health Foundation being an excellent organization to support.
Sun Health Foundation offers a meaningful way for individuals to designate us as a beneficiary of their qualified charitable distributions. We are dedicated to enhancing the quality of life and wellbeing for the communities we serve. Through our partnership with local community hospitals and our investment in health and wellness, we are passionate and care about those in the West Valley.
To find out more about Sun Health Foundation and our mission, please contact us by calling (623) 471-8500 or visiting SunHealthFoundation.org/.
