We have been doing charitable contributions through our DAF for years. Then shifted to using my IRA when I finally got a checkbook for the account and it was easier to simply write a check!!
1 Like
If your retired relative is receiving Social Security then realizing long-term capital gains may result in additional tax owed even when overall income is solidly in the 0% cap gains tax bracket.
The reason is capital gains are part of the combined income used to determine how much if any of Social Security income is taxable. Past a threshold, increases in combined income increase the taxable amount of Social Security benefits and are treated as ordinary income. Once ordinary income (exceeds the standard deduction (for those not itemizing) the increase results in more tax owed at ordinary income rates.
It’s a little complicated to figure out all the moving parts by hand. Before selling any stock it’s worth running a tax estimator to see the impact such as this one: 1040 Tax Calculator
1 Like
QCDs are a much more tax-efficient method of making charitable donations. While most assets escape taxation on death (assuming the estate is under the federal an/or state tax exemption), IRAs do not and the assets within them are eventually subject to tax. Donating via QCDs removes a taxable asset from the invididual’s estate.
5 Likes
I’m on our church finance committee, and I’ve been trying to figure out how to encourage QCD. (We’re an older congregation, alas few kids and no Sunday School). Many us RMD to cover their pledge, but QCD can start at age 70.5 - we’ll do it first time this year as my husband now qualifies.
3 Likes
This is a really good link. Maybe you could use it as a guide for communicating the benefits? Can You Give a QCD to Your Church to Satisfy Your RMD? | Thrivent
(Your church sounds like ours. H is on finance committee, and only a few members who could probably give through QCD do so.)
2 Likes
Info on getting taxes withheld from Social Security
1 Like
If you are doing an educational program, be sure to include “how to use life insurance” as part of the strategy. There is likely an insurance expert in the community who can walk congregants through it.
My synagogue got a few unexpected windfalls when congregants used life insurance for their “legacy” gifts, the policies bought when they were young and insurance was cheap.
It’s a good strategy for someone whose heart is generous but whose pocketbook hasn’t caught up!
Agree that the QCD giving needs more and better PR!
3 Likes
There are several decision framework whether to donate IRA withdrawals to lower taxes or not.
If you need the cash:
Take the RMD. Period.
Liquidity > tax optimization.
If you don’t need the cash and already give:
QCD is dominant strategy.
If you don’t give to charity:
Then yes — take the RMD and pay the taxes. QCD makes no sense.
So the optimal strategy depends on intent:
- Cash maximization → take RMD
- Tax efficiency + legacy + income control → QCD
- Blended strategy → partial QCD + partial RMD
4 Likes
This topic was automatically closed 180 days after the last reply. If you’d like to reply, please flag the thread for moderator attention.