Giving Back while Saving On Taxes: The benefits of Qualified Charitable Distributions
If you are over age 70½, a Qualified Charitable Distribution (QCD) can be a simple and tax-efficient way to make charitable gifts directly from your IRA. A QCD can also count toward your Required Minimum Distribution (RMD), which makes it especially useful for retirees who already give to a church, school, foundation, or other qualifying charity.
The main advantage is that the QCD goes directly from your IRA to the charity and is generally not included in your taxable income. This can be more valuable than taking your RMD personally and then writing a check to charity, especially if you use the standard deduction and do not itemize your charitable contributions.
- Assume your RMD is $50,000 and you normally give $10,000 per year to your church and other charities.
- If you take the full $50,000 RMD and then donate $10,000 from your checking account, the entire $50,000 is generally included in income. If you do not itemize deductions, you may receive little or no additional federal deduction from the charitable gift.
- Instead, you could have $10,000 sent directly from your IRA to the qualifying charities as a QCD. That $10,000 counts toward your $50,000 RMD, leaving only $40,000 to take personally. In this example, the QCD keeps $10,000 of the IRA distribution out of taxable income.
If you are in the 22% federal tax bracket, keeping $10,000 out of taxable income could reduce federal income tax by roughly $2,200, depending on your overall tax situation. A lower adjusted gross income may also help in other areas, including the amount of Social Security subject to tax and, in some cases, future Medicare premiums.
The important part is that the distribution needs to be handled correctly. The funds generally need to go directly from the IRA to an eligible charity, and QCD rules and annual limits apply. You also cannot take both the QCD income exclusion and a charitable deduction for the same dollars.
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If you are already making charitable gifts and taking an RMD, it is worth reviewing whether a QCD should be part of your annual withdrawal strategy before taking your full RMD. We would be happy to review your situation and coordinate the strategy with your tax professional.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Nathan Wyatt for the Investment Service Center’s use.
Following Democratic victories in both the House and Senate, investors initially welcomed the prospect of reduced political uncertainty. However, attention quickly shifted to the implications for artificial intelligence, with several newly elected state and local officials advocating for slower deployment and increased regulation. Given the market's heavy reliance on the AI buildout theme, this shift in sentiment weighed heavily on equities, pushing the VIX to levels not seen since April and triggering the S&P 500's largest single day decline in more than a year.
This week's chart examines the ten largest daily moves in the S&P 500 over the last four decades and what happened the following day. While the initial swings were dramatic, they were often followed by a meaningful reversal, highlighting how quickly sentiment can change during periods of market stress. These reversals were typically much larger than the market's average daily move, illustrating that some of the market's strongest gains have occurred immediately after steep declines, while some of its sharpest pullbacks have followed powerful rallies. While Thursday's selloff grabbed headlines, it remains well short of many of the historic declines shown in the chart, all of which were ultimately overcome as markets recovered and moved higher over time.
History shows that large market moves are often followed by meaningful moves in the opposite direction, making it extremely difficult to time the market. Investors who react to large one day moves risk missing subsequent rebounds or recoveries. Maintaining a disciplined, long-term approach has typically been more effective than attempting to trade around short-term shocks. While volatility can make for an uncomfortable ride, investors have generally been rewarded for staying buckled into the helicopter rather than jumping out in the middle of the turbulence.
Chart of the Week: Source: FactSet, J.P. Morgan Asset Management. *November 5 is shown for comparison and is not among the largest market moves. **Average daily returns are shown separately for rising and falling market days.
Thought of the Week: Source: FactSet, J.P. Morgan Asset Management
Abbreviations: Cons. Sent.: University of Michigan Consumer Sentiment Index; CPI: Consumer Price Index; EIA: Energy Information Agency; FHFA HPI: - Federal Housing Finance Authority House Price Index; FOMC: Federal Open Market Committee; GDP: gross domestic product; HPI: Home Price Index; HMI: Housing Market Index; ISM Mfg. Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally Adjusted Annual Rate
Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally
Adjusted Annual Rate
MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East.
Bond Returns: All returns represent total return. Index: Bloomberg US Aggregate; provided by: Bloomberg Capital. Index: Bloomberg Investment Grade Credit; provided by: Bloomberg Capital. Index: Bloomberg Municipal Bond 10 Yr; provided by: Blomberg Capital. Index: Bloomberg Capital High Yield Index; provided by: Bloomberg Capital.
Key Interest Rates: 2 Year Treasury, FactSet; 10 Year Treasury, FactSet; 30 Year Treasury, FactSet; 10 Year German Bund, FactSet. 3 Month LIBOR, British Bankers’ Association; 3 Month EURIBOR, European Banking Federation; 6 Month CD, Federal Reserve; 30 Year Mortgage, Mortgage Bankers Association (MBA); Prime Rate: Federal Reserve.
Commodities: Gold, FactSet; Crude Oil (WTI), FactSet; Gasoline, FactSet; Natural Gas, FactSet; Silver, FactSet; Copper, FactSet; Corn, FactSet. Bloomberg Commodity Index (BBG Idx), Bloomberg Finance L.P.
information from FactSet's Pricing database as provided by MSCI. Russell 1000 Value Index,
Style Returns: Style box returns based on Russell Indexes with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for stated period including the reinvestment of dividends. The Index used from L to R,
top to bottom are: Russell 1000 Value Index (Measures the performance of those Russell 1000 companies with lower price-to book ratios and lower forecasted growth values), S&P 500 Index (Index represents the 500 Large Cap portion of the stock market, and
is comprised of 500 stocks as selected by the S&P Index Committee), Russell 1000 Growth Index (Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values), Russell Mid Cap Value Index (Measures
the performance of those Russell Mid Cap companies with lower price-to-book ratios and lower forecasted growth values), Russell Mid Cap Index (The Russell Midcap Index includes the smallest 800 securities in the Russell 1000), Russell Mid Cap Growth Index (Measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values), Russell 2000 Value Index (Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 2000 Index (The Russell 2000 includes the smallest 2000 securities in the Russell 3000), Russell 2000 Growth Index (Measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted growth values).
Past performance does not guarantee future results.
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