Qualified Charitable Distributions (QCDs) and Required Minimum Distributions (RMDs)
Everyone hates taxes, so why not pay less of them? If you’re at least 70 and have a traditional IRA, then you’re in luck.
Think of paying taxes like crossing a big red line. Once you cross it, there’s no going back and you must pay the tax due. By choosing to give to the church directly from your traditional IRA (Roth IRAs don’t provide additional tax savings for charitable giving), you avoid crossing that big red line and avoid paying taxes on the amount you give. This is called a Qualified Charitable Distribution.
Taxes can significantly reduce the impact of your retirement savings. Qualified Charitable Distributions (QCDs) provide a smart way to give while also reducing your tax liability. For 2025, the IRS allows you to give up to $108,000 per year without paying any tax on that amount.
QCDs can also satisfy your Required Minimum Distribution (RMD) requirement set by the IRS. What is an RMD? Essentially, it’s a way for the IRS to require you to pay taxes on your retirement savings, whether you want to or not. What’s more, RMD amounts generally increase as you get older.
Here’s where QCDs become especially valuable: every dollar you give to the church as a QCD counts toward fulfilling your RMD for that year. Remember the big red tax line? This is currently the only way to avoid crossing that line on charitable gifts from your IRA, helping reduce your tax burden while supporting the church. It’s truly a win-win.
“Everyone hates taxes, so why not pay less of them?”
Investment Donations from Brokerage Accounts
What if you’re not 70 yet and have investments in a regular brokerage account? You can still give stocks, bonds or other investments directly to the church as a charitable gift.
By transferring appreciated investments instead of selling them first, you can generally avoid paying capital gains taxes that would otherwise be owed on the sale.
Here’s an example: Let’s say you were one of the fortunate few who bought shares of Amazon stock 20 years ago when it was only $2 per share.
Does How You Give Matter?
Yes. There are many ways to give charitably, but structuring your gift strategically can also reduce your overall tax liability each year.
Topics discussed above include:
- Qualified Charitable Distributions (QCDs) and Required Minimum Distributions (RMDs)
- Investment donations from taxable brokerage accounts
- Estate planning
This post provides general information related to the laws and tax considerations of charitable giving. It is intended to help you begin discussions with your professional advisors. It does not provide legal or tax advice. Please consult your attorney and/or accountant before taking any action.
