Year-End Giving Strategies:
How RMDs and QCDs Can Lower Your Taxes
RMDs: Required Minimum Distributions | QCDs: Qualified Charitable Distributions
…All this is (for) nothing if one go not forward, if one not point all this at the farther end.
John Wesley — The Use of Money
Why 2025 might be different.
If you’re approaching retirement and you give charitably, you may have a unique opportunity this year to reduce your tax burden while magnifying your impact.
For some, Halloween ushers in the holiday season. For those of us who enjoy a good spreadsheet, it signals something else entirely — the start of year-end tax and financial planning. With recent tax law changes taking effect this year and next, now is the time to take a closer look at your giving and retirement strategies. Some of the changes include changes in standard deductions. Careful attention should be given to retirement contributions and Health Saving Accounts (HSAs) as well.
The aspect that I want to address is your charitable giving. This might be a good year to “bunch” your giving if you’re not an itemizer. Meaning, you could consider super-sizing a few years’ worth of charitable giving into one year to get above the standard deduction threshold. For example, if you normally give $5,000/year, you might give $15,000 this year and skip next year. There are calculators such as DAFGiving360 that can help you work on this.
What is an RMD?
Required Minimum Distribution — is the amount required to withdraw once you’re over age 73 from pre-tax retirement accounts. A Required Minimum Distribution (RMD) is an annual withdrawal. Upon withdrawal taxes are due on the amount withdrawn. What if you don’t need all or part of your RMD? If you are fortunate enough not to need the distribution for living expenses, consider a Qualified Charitable Distribution (QCD). You can gift up to $108,000 directly from your IRA to any 501c3 and bypass the taxes. If you are married and both of you qualify, the combined maximum is $216,000.
RMD: Required Minimum Distribution – the annual withdrawal you must take from pre-tax retirement accounts after age 73.
What is a QCD and how can you use it?
Who can use QCDs? Anyone over 70½. While the QCD can’t be deducted as a charitable contribution, it also won’t hit your taxes as income, reducing your income, and therefore your taxes, and it may also satisfy your RMD.
QCD: Qualified Charitable Distribution
A direct gift from your IRA to a nonprofit, tax-free.
Funding Mission and Ministry while reducing your tax liabilities sounds like faithful stewardship to this personal finance nerd. Time is of the essence as the clock is ticking down on 2025 quickly. Now is the time to contact the necessary person(s) to put these tax-wise decisions into effect. Making a positive difference for yourself and for those your gift will impact in the days ahead sounds like doing good while doing well.
If you’re looking to make a lasting impact while maximizing your tax benefits, now is the time to act. Talk with your financial advisor, or contact the United Methodist Foundation of North Carolina to explore charitable strategies like QCDs and donor-advised funds.
Together, we can help you make 2025 a year of faithful and tax-wise generosity.
Want to explore your giving strategy before year-end? Send us an email and schedule a brief call with us at UMF. Let’s make 2025 a year of faithful impact and tax-smart generosity.
This article was submitted by Rev. Lynn Benson, Director of Legacy Giving for the United Methodist Foundation, Inc. If you would like more information regarding UMF, you can contact Lynn at [email protected].