OT? Tax-advantaged charitable giving

This article describes two types of charitable donations that reduce the tax burden on the donor.

https://www.wsj.com/personal-finance/taxes/qcd-daf-qualified-charitable-distributions-vs-donor-advised-funds-3a6b72cf?mod=hp_lead_pos11

How Seniors Can Donate More to Charity and Pay Less in Taxes

While all Americans can get tax breaks for giving, those 70½ or older have the best choices. Here’s a rundown on two key tax-favored ways to give.

By Laura Saunders, The Wall Street Journal, Dec. 13, 2024

Qualified charitable distributions

QCDs allow savers 70½ and older to donate pretax funds directly from traditional IRAs to charities and owe no income tax on those withdrawals. The QCD limit is $105,000 for 2024 and $108,000 for 2025 for each IRA owner, and the total can include many separate donations.

QCDs offer a way for donors to get charitable tax breaks while still taking the standard deduction, which is the amount taxpayers get if they don’t itemize deductions on Schedule A…Up to the limits described above, QCDs can be subtracted from required minimum distributions, or RMDs, that many owners of traditional IRAs must take annually…

QCD donors either must have their IRA sponsor cut checks for the charities or write checks directly from the IRA. Then they must make sure the charities receive the checks and cash them before year-end. Donors also need proper acknowledgments of the gifts

Donor-advised funds

DAFs have no age restrictions…With a DAF, a donor gives money or assets to a dedicated account at an umbrella charity—known as a sponsor—and gets a tax deduction that year. Donors can then postpone further giving decisions until they’re ready, and the funds can be invested and grow tax-free until disbursement to specific charities. There’s no further deduction then.

There are a variety of sponsors. Financial firms like Fidelity, Schwab and Vanguard have charitable affiliates with DAFs, and community foundations offer them. … [end quote]

The article describes lots of little factors that can make one or the other more advantageous.

The article fails to mention the new (in 2023) charitable gift annuity from an IRA, where up to $50,000 can be donated to a charity which then pays the donor an annuity funded with the donation.

Wendy

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If you plan to donate to a charity these methods get you a tax deduction. But for most of us you give away a dollar to save 30 cents or less in taxes. It often is better to pay the tax and invest the 70 cents.

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