Charitable gifting is especially in the spotlight since Microsoft co-founder Bill Gates announced that he plans to eventually give away most of his $200 billion fortune to charities worldwide. While we can’t all be Bill Gates, in my practice as a financial advisor I find it is very common that clients wish to incorporate some level of charitable giving within their financial planning.
People may want to support specific charities, causes or missions about which they are passionate; make a positive impact on their community, society or the environment; honor or remember a friend or family member; or encourage others to get involved with charities and organizations. All this is a good thing, but it does take planning to make the most of your gifting.
For example, a common concern is that the increased standard tax deduction introduced with the 2017 Tax Cuts and Jobs Act (TCJA) makes it less likely many taxpayers will benefit tax wise by itemizing deductions, including charitable contributions. If current legislation being debated in Congress passes, this issue is likely to continue. However, depending upon your financial situation and desired goals, there are tools that can still enable you to effectively incorporate charitable giving in a tax-efficient manner.
An example is the use of a Qualified Charitable Distribution (QCD). With a QCD, in most cases those at least age 70.5 who have a qualifying tax-deferred IRA can use a QCD to send a donation directly from your IRA account to your desired eligible charity. In 2025 up to$105,000 can be donated tax-free using this method. The definition of an eligible charity is pretty broad, and a financial advisor or tax professional can help you ensure your desired charity qualifies.
A QCD approach can offer additional tax advantages for those age 73 and older who are subject to a Required Minimum Distribution (RMD). RMDs are amounts that the IRS calculates must be withdrawn from an IRA account starting the year after you achieve age 73; this amount is then consequently subject to income tax. These withdrawals must be taken whether you need the money or not.
Using a QCD, eligible persons can elect to donate all or a portion of this RMD amount directly from your IRA to your desired eligible charity, up to the allowable maximum. The donated funds are then not taxable to you or to your desired charity. Therefore, if you don’t require your annual RMD withdrawals for basic or lifestyle desired expenses, the QCD can provide tax benefits with charitable donations, especially for those who are not able to itemize their deductions.
There are a variety of other gift giving vehicles you can consider that offer tax or planning benefits. These include charitable gift annuities, charitable lead trusts, pooled income funds, establishing a private foundation, and donor-advised funds. An accountant or financial advisor should be able to assist you in determining if any of these options are appropriate for you. The most important point is if you desire to make charitable donations, there are vehicles to effectively include them within your financial plan - even if you aren’t a billionaire. Together, we can work to keep you on-track toward your financial goals.
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