Giving and Tax Planning

With the close of 2025 upon us and the dawn of the new year on the horizon I would like to share a couple of ideas that could help you with Giving and tax planning.

The first idea is a Qualified Charitable Distribution (QCD). A QCD allows you to pay your TKC dues or Giving directly from your IRA, reducing your taxable income while supporting a cause you care about. It’s a powerful tool for both Giving and tax efficiency.

What Is a QCD?

A Qualified Charitable Distribution (QCD) is a direct transfer of funds from an Individual Retirement Account (IRA) to a qualified charity. According to IRS guidelines TKC is considered a qualified charity. Available to individuals aged 70½ or older, QCDs can count toward satisfying annual Required Minimum Distributions (RMDs), up to a maximum of $100,000 per year per taxpayer for 2024 and $108,000 for 2025

Key Benefits of QCDs:

• Tax Savings Without Itemizing

  
  

  QCDs reduce taxable income directly. This is especially valuable for taxpayers who take the standard deduction and cannot otherwise itemize charitable contributions.

• Lower Adjusted Gross Income (AGI)

  
  

  By excluding the donated amount from taxable income, QCDs help lower AGI. This can reduce exposure to higher tax brackets and minimize the impact on Medicare premiums.

·         Satisfies RMD Requirements 

·         Directing all or part of your RMD to charity through a QCD avoids unwanted taxable income while still fulfilling IRS requirements.

• Support for Good Cause

  
  

  Beyond tax advantages, a QCD provides meaningful support to TKC, allowing you to align your financial planning with Jewish values.

• Potential Estate Planning Benefits

  
  

  Reducing IRA balances through QCDs can lower the taxable portion of your estate, helping heirs avoid higher future tax burdens.

Here is an Example Scenario:

Suppose you must take a $20,000 RMD.  If you donate $10,000 via a QCD:

• Your taxable income decreases by $10,000.

• You meet half of your RMD obligation.

• You can pay your temple dues and/or make a substantial gift, while avoiding the potential of being pushed into a higher tax bracket.

QCDs are particularly beneficial for:

• People with IRAs who want to minimize tax exposure.

• Individuals who take the standard deduction.

• Those who want to combine financial efficiency with charitable impact.

A Qualified Charitable Distribution is more than a tax strategy—it’s a way to turn retirement savings into a legacy of giving. By lowering taxable income, satisfying RMDs, and supporting TKC, a QCD offers a win-win solution for both financial health and philanthropy.

The second idea is a Donor-Advised Fund (DAF) It is one of the most flexible and tax-efficient ways to give to charity, allowing donors to maximize their impact while simplifying the process of philanthropy.

What Is a Donor-Advised Fund?

A Donor-Advised Fund (DAF) is a charitable giving account administered by a sponsoring organization (such as a community foundation or financial institution). Donors contribute assets—cash, stocks, or other investments—into the fund and then recommend grants to TKC or other charities over time.

This structure makes DAFs a popular alternative to private foundations, offering similar benefits with far fewer administrative burdens.

Key Benefits of DAFs

• Immediate Tax Deduction

  
  

  Contributions to a DAF are tax-deductible in the year they are made, even if grants to charities are distributed later. This allows you to optimize tax planning while spreading out giving.

• Flexibility in Timing

  
  

  Donors can contribute during high-income years to maximize deductions, then recommend grants gradually. This flexibility helps align giving with personal financial planning.

• Simplified Recordkeeping

  
  

  Instead of tracking multiple receipts from different charities, donors receive one tax receipt from the sponsoring organization. This streamlines tax season and reduces paperwork.

• Tax-Free Growth of Assets

  
  

  Investments inside a DAF grow tax-free, meaning more money is available for charitable purposes over time.

• Privacy and Anonymity

  
  

  You can choose to give anonymously, shielding your identity while still supporting causes you care about.

• Lower Costs Compared to Private Foundations

  
  

  DAFs avoid the complex legal, administrative, and reporting requirements of private foundations, making them more accessible to individuals and families.

• Family and Legacy Planning

  
  

  DAFs allow donors to involve children or heirs in grantmaking decisions, fostering a culture of giving across generations.

A Practical Example:

Let’s say you contribute $50,000 in appreciated stock to a DAF:

• You receive an immediate charitable deduction for the fair market value.

• Paying capital gains tax on the stock’s appreciation is avoided.

• The assets can be invested within the DAF, potentially growing.

• Over the next decade, you can recommend grants to TKC and other charities, maximizing long-term impact.

DAFs are ideal for:

• Individuals who want tax efficiency and flexibility in their giving.

• Families seeking to build a multi-generational legacy of giving.

• Donors who prefer simplicity over the administrative complexity of foundations.

A Donor-Advised Fund combines the joy of giving with smart financial planning. By offering immediate tax benefits, streamlined administration, and long-term growth potential, DAFs empower you to make a lasting difference for TKC or other causes you care about most.

While these are good ideas, no two taxpayer situations are exactly alike. Please consult with your CPA or tax advisor to confirm the benefits of a QCD or a DAF for your situation.