Our resident CPA Conner and I talk about charitable giving a lot, especially this time of year. Each time we review strategies, we come back to the same conclusion. Qualified Charitable Distributions (QCDs) are hard to beat. For most people over age 70.5, they give the best tax and investment result.
How do QCDs work? Once you’re old enough, you can give money directly from your IRA to charity. You received a tax deduction when you put the money in, and now you never pay tax on it. It counts towards your required minimum distribution. What’s not to like?
But what about donating appreciated stock? That could make sense if you already itemize deductions. Most people don’t itemize these days. Even if you do, giving through QCDs can be a better tax answer once you’re over age 70.5.
What about a legacy IRA? We’ve seen plenty of flyers and pitches from charitable gift officers touting these. Sure, you can get a nice income stream in return for donating some IRA dollars. You realize this money has to come from somewhere, right? It’s reducing your charitable donation. Conner ran a detailed review on one of these this summer. His conclusion, the plain vanilla QCD is still the most effective way to go. Buy an immediate annuity if you want the guaranteed income stream.
Qualified Charitable Distributions (QCDs) aren’t sexy. We love them because they are simple and effective. That said, they may or may not be the best choice for you. Talk to your advisor to see what they think. Need an advisor? Reach out.
About the Author: John O’Connor
John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2022. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.
Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.