With the “Season of Giving” fast approaching, many of us are thinking about what to get our children, our spouse, or our parents over the holidays. You also may be planning how you intend to give back to your community or charitable organizations this year. In any case, the high-inflation economy is expected to give many individuals pause in fulfilling their gifting/charitable intentions in 2022. *
Of course, there is the classic axiom that “We make a living by what we get. We make a life by what we give” (Courtesy of Winston Churchill). But, beyond moral gratification and fulfillment, what can be done to return a financial incentive to you?
While cutting back is certainly a worthy consideration this year, there are many ways in which “giving” can return a “dividend” to you – in most cases, on your tax return.
Perhaps the most efficient means to give to charitable organizations is through the use of Qualified Charitable Distributions – QCDs for short. I will begin with a caveat. QCDs are only available to IRA owners who are subject to Required Minimum Distributions (RMDs). You can read more about which individuals and accounts are subject to RMD’s at the link below.**
If you are subject to required distributions, QCDs allow you to gift up to the lesser of your annual RMD or $100,000/year directly to the charitable organization(s) of your choosing (in lieu of withdrawing those dollars as taxable income). The benefit is two-fold. 1) The charitable organization receives dollars that have grown tax-deferred in your IRA to fund their endeavors. 2) You avoid realizing any income on those dollars that otherwise would have hit your tax return following a traditional RMD procedure.
Qualified Charitable Distributions are still not for everyone. Many retirees rely on their RMD income to support their daily living expenses and that group is the majority. However, if you think giving a portion of your RMD to charity may be a beneficial strategy, please do not hesitate to reach out. We are more than happy to assist in evaluating and fulfilling your charitable intentions
*https://www.cnn.com/2022/09/13/economy/holiday-forecast-deloitte
