Gift Smarter, Not Harder

Give Smarter, Not Harder

As the holidays draw near, many of us feel a renewed pull toward generosity - whether that's supporting a favorite charity like Leo's Pride, helping a family in need, or giving back to our community in meaningful ways. It's a season that reminds us how blessed we are and how powerful it can be to share those blessings with others.

But while writing a check from your bank account is a quick and simple way to give, it's not always the most effective way to give. With a little forethought, your generosity can have an even greater impact - both for the organizations you care about and for your own financial picture. Form donating appreciated investments to using charitable giving tools designed for flexibility and tax efficiency, there are smarter ways to give that align with your goals and values.

Qualified Charitable Distributions (QCDs) for Those 70 1/2 and Up

Starting at age 70 1/2, individuals can give funds directly from their Individual Retirement Account (IRA) to their church or any other charitable organization tax-free through a qualified charitable distribution (QCD).

The 2025 QCD limit is $108,000 of total distributions from your IRA in the year, regardless of the number of recipients. If you give $80,000 to your favorite charity through a QCD, you could only give another $28,000 via QCD this year, regardless of how many other charities you disperse this money amongst.

A note here: these distributions must be made directly from your IRA to the charitable organization of your choosing to realize the tax benefits. In contrast, if you were to take the distribution to your checking account, then write a check from there, the full amount of that distribution would be taxable to you - eliminating the tax benefits you could have received otherwise.

Required Minimum Distributions (RMDs) for Those 73 and Up

Individuals with IRAs are required to begin taking minimum distributions (RMDs) by April 1 of the year following the one in which the taxpayer attains age 73. These RMDs are required by December 31 in every year thereafter. (Bonus tip: this means that you could potentially have two RMDs in the calendar year you turn 74). You have to take these distributions regardless of whether you need, or even want, the money - Uncle Sam wants his taxes!

The amount of your RMD will be added to your taxable income in that year. This income increase could potentially push the taxpayer into a higher income tax bracket or trigger phaseouts of tax deductions they were previously utilizing.

Individuals 73 and above who are required to take these RMDs can use a QCD to fulfill all or part o their RMD for that year, up to the $108,000 limit we previously mentioned.

     Tax Savings Example:

Brian is 72 years old and has $300,000 in his traditional IRA. Between his state pension and Social Security, he really doesn't need the money for retirement expenses. Because he isn't 73 yet, he doesn't have to begin taking his RMDs until next year.

Brian's church is raising money to build a new basketball court. Brian claims to be the best point guard in the church basketball league and a new court would definitely help with his knee pain, so he decides to give $20,000 to his church for the new court. Instead of writing a check from his bank account, he makes a QCD directly from his IRA to the church.

Brian pays no income tax on the $20,000 outflow, saving himself roughly $4,000 in taxes. Not only that; he has also decreased his IRA balance from $300,000 to $280,000. This lower balance means his RMD next year, which is fully taxable, will be decreased, as well.

Susan is 74 years old and is required to take an RMD from her traditional IRA this year. Her RMD is $15,000, but she doesn't need or want the money. Susan loves animals (especially her Chiweenie "Mo") and has a soft spot for the ASPCA.

Susan is in the 24% tax bracket. If she were to take the RMD to her checking account and write a check to the ASPCA, she would owe $3,600 in income tax and only have $11,400 left for the organization.

Instead, Susan uses a QCD to send the $15,000 directly from her IRA to the ASPCA. By using a QCD, Susan's RMD is now fully satisfied for the year, and she will pay $0.00 in income tax on the $15,000 distribution.

Not only that, Susan is just below the first IRMAA threshold. Adding the $15,000 to her taxable income for the year likely would have pushed her over that threshold and significantly increased her Medicare premiums.

Gifting Appreciated Stock:

Another tax-efficient way to give to your church or favorite charity is through long-held stock. Instead of giving cash, you can donate highly-appreciated stock that you have held for longer than a year directly to a charitable recipient of your choosing. When you do this, you avoid paying capital gains tax on the increase in value. You can also deduct the fair market value of the stock as an income tax deduction if you itemize your deductions. Even more, if the recipient organization sells the stock right away, they will also not pay any capital gains tax.

Example: Mark & Randy

Mark and Randy are brothers who have always loved investing. In fact, they have breakfast together every Friday morning to discuss market news, new stocks they're interested in, and the outcome of their church league basketball game the night before. After one of their breakfast meetings in 2017, they decided to each buy $5,000 of stock in Scudder Industries, a new crane manufacturer based in Savannah, Georgia. Today the stock is worth $20,000, but some recent news about hydraulic hose shortages has the brother nervous and they decide it's time to sell the stock.

They heard about Brian's claim of being the best guard in the church basketball league and vehemently disagree. What better way to prove him wrong than on a shiny new court? They decide they both want to donate the value of their stock to the church to help fund the new basketball court, but they have different ideas of the best way to do it. Mark and Phil will both pay 20% capital gains tax this year.

Mark's Way: Mark sells his stock for $20,000 and moves the proceeds to his checking account. He will owe $3,000 in tax on the $15,000 gain. The church receives the remaining $17,000. If Mark itemizes, he can only deduct the $17,000 he actually donated.

Randy's Way: Randy donates the stock directly from his investment account to the church. He pays $0 in capital gains tax and can deduct the full $20,000 if he itemizes his deductions. The church receives the entire $20,000 and if they sell the shares immediately, will also pay no capital gains tax.

The Sticky Part:

We would be remiss if we didn't address the sticky part of these strategies - there can be complicated feelings involved in considering ways you can benefit from your own charitable giving, and we understand that. We occasionally hear people say, "If I'm going to give to my church or a charity, I'm not going to do it for a tax break." And they are absolutely right! That's not the reason to give. Generosity, at its core, comes from gratitude and the desire to make a difference, not from what we might receive in return. But thoughtful giving isn't about chasing a benefit, it's about stewardship. Our team believes that we are called to be wise managers of what we have been entrusted with and that includes thinking carefully about how our giving is structured.

When we give strategically, we're not changing the why behind the gift, we're simply refining the how. If you can bless your church or favorite charity in the same amount while avoiding the unnecessary taxes, that doesn't cheapen the gift. On the contrary, it actually multiplies its impact. More of your resources stay in circulation for giving, helping family, or meeting future needs, rather than being lost to avoidable tax costs.

Please note: The case studies are situations are hypothetical situation based on real life examples. Names and circumstances have been changed. 

Blackbridge Financial and LPL Financial do not provide legal advice or tax services.  Please consult your legal advisor or tax advisor regarding your specific situation.