Are You Maximizing Your Tax Savings?

Year-end tax planning is upon us!  As we approach the new year, many clients are looking to optimize their 2025 tax savings. One common avenue for maximizing your tax break is year-end gifts to charity. For taxpayers over 70½, one option to take advantage of is to make a Qualified Charitable Distribution (QCD).

A QCD is a direct transfer from an Individual Retirement Account (IRA) to any eligible nonprofit organization. Distributions from an IRA, which would otherwise be taxable ordinary income, are offset by the QCD. In 2025, individual taxpayers can transfer up to $108,000 to the charity of their choosing. For those Married Filing Jointly, spouses are also entitled to make an additional $108,000 donation, bringing the total allowable donation amount to $216,000.

For individuals over 70½, this strategy can be used to reduce your taxable income without affecting your standard deduction. On average, only 12% of taxpayers itemize according to recent IRS data. This means that the overwhelming majority of filers are unable to take advantage of the tax benefits that accompany their charitable donations. QCD transfers bypass this issue altogether.

This “above-the-line” tax exclusion is a dynamic strategy which can serve multiple purposes. In addition to providing a tax break, QCDs are particularly attractive for taxpayers subject to Required Minimum Distribution (RMD) requirements. The IRS rules require that retirees must begin taking RMDs from their pretax retirement accounts at age 73, and that these distributions are taxed as ordinary income. A QCD can offset RMD distributions, which helps keep adjusted gross income on tax returns low.

If you would like to discuss how a QCD would affect your tax return, please do not hesitate to contact us at (404) 255-7400.