As the end of the year approaches, you might be thinking about making charitable contributions to your favorite organizations. In doing so, not only can you make a difference by contributing to the causes that matter most to you—but you may also be able to enjoy some notable tax benefits in exchange for your charitable gifts.
If you have an Individual Retirement Account (IRA), one option you won't want to overlook when it comes to maximizing your charitable giving is to leverage qualified charitable distributions QCDs.
If you’re age 70.5 or older and have an IRA, you may be able to directly contribute pretax dollars to your favorite charitable organizations before the end of the year. Specifically, QCDs allow you to donate up to your annual contribution limit (which works out to $108,000 per person for the 2025 tax year) from your IRA to a qualified charity.
If you're thinking about leveraging QCDs to maximize your charitable giving this year, there are some eligibility requirements to keep in mind. For starters, you must be at least 70.5 years of age and have an IRA retirement account.
Likewise, the funds from your IRA must be transferred directly to a qualifying charitable organization; the money cannot cross into anybody else's possession (not even your own).
It's important, too, to understand that not all charitable organizations will be eligible to receive these tax-free contributions. Some examples of exclusions include Donor-Advised Funds (DAFs) and private foundations.
There are many reasons to consider donating pretax IRA dollars to charitable organizations if you meet all eligibility requirements and aren't relying on your IRA income in retirement. Perhaps the most notable advantage is that donating funds from your IRA reduces the total balance of the account itself, which could result in lower required minimum distributions (RMDs) for account holders down the road.
Making charitable contributions from an IRA can also reduce your total taxable income, reduce the taxable portion of your future Social Security benefits and allow you to contribute more to the causes that are most important to you.
What if you don't have an IRA—or you have an IRA but don't meet the eligibility requirements covered here? If this is the case, the good news is that there could still be some ways to optimize your charitable contributions and make a real difference this tax year.
One option to consider is to make donations of any appreciated assets to charitable organizations. Stocks, bonds and even real estate donations can make a major difference because they are not subject to capital gains taxes.
Alternatively, if you have a life insurance policy in place, you may want to consider naming a charitable organization as a beneficiary on your policy. While this may not necessarily make a difference in the current tax year, it is a simple change you can make to enhance your charitable giving down the road.
Finally, check in with your employer's HR team to find out whether your company offers any donation-matching. Some employers will fully or partially match certain charitable donations, which can be a great way to maximize your giving impact without necessarily spending more out of your own pocket.
The end of the year is a fitting time to start planning your charitable giving not just to maximize your tax benefits, but also to make a real difference in the causes and missions you care most about.
At the same time, charitable giving and the tax rules surrounding it can be complex—which is why it's always a good idea to discuss your giving strategy with a trusted financial advisor. An experienced professional will be able to tell you whether your charitable giving plans are in your best interest while making recommendations to optimize your giving through an IRA or other strategies.
From there, you can head into another year knowing you've done your part to give to the charities you care about—and you just might be able to enjoy some tax benefits as an added bonus.
If you have any questions or would like additional information, please contact our tax services team.