Are Qualified Charitable Distributions Always the Best Tax-Saving Move?
Qualified charitable distributions (QCDs) have become a popular way to unlock the tax savings of philanthropic gifts. However, for high-net-worth individuals, gifting QCDs from an individual retirement account (IRA) may not be an option.
Gifting appreciated securities is a more effective method for individuals who itemize deductions.
Here’s how to know which strategy best fits your circumstances.
Gifting publicly traded appreciated securities: Efficiency and optionality
Donating publicly traded stocks – especially if the basis is very low relative to market value at the time of the gift – is generally the most tax-efficient donation method available.
When gifting qualified appreciated stock, a stock typically held for more than one year, you would get an income tax deduction based on the fair market value of the donated asset and not have to pay capital gains tax on that asset’s unrealized appreciation.
QCDs: Streamlined giving from IRAs
QCDs have become very popular with retirees as a systematic way to donate directly from IRAs, potentially reducing taxable required minimum distributions (RMDs).
Because QCDs come directly from either IRA distributions or RMDs, they effectively serve as an adjustment to total income. Reducing total income in this way is valuable because total income is the starting point in calculating AGI, a reduction of which benefits taxpayers eligible for, or subject to, phaseouts, deduction limits or exposure to net investment income tax – all of which are determined based on a taxpayer’s AGI.
QCDs are not always the best way to give
The ancillary tax savings associated with QCDs won’t often surpass those of a donation made with appreciated securities. Given the thresholds and potential tax savings, this is especially true for high-net-worth and ultra-high-net-worth retirees.
Additionally, funding charitable gifts from long-term appreciated securities in a taxable portfolio, as compared to QCDs from an IRA, is not a binary decision. These strategies can be used in concert, depending on your appetite and capacity for charitable giving each year.
Moving toward an intentional giving strategy
Moving away from a reactive giving strategy requires a deeper conversation about your family’s charitable priorities. A J.P. Morgan team can provide meaningful insight and assistance to help you and your family achieve your desired philanthropic goals. You should also speak with your tax advisor about which actions may be right for you.
Rick Barragan is the Managing Director,
Los Angeles Market Manager, for J.P. Morgan Private Bank.
[email protected] | (310) 860-3658
privatebank.jpmorgan.com/los-angeles
Source: “Are qualified charitable distributions always the best tax-saving move?,” by Adam Ludman, Head of Tax Strategy, and Tom Lenkiewicz, Weath Strategist, May 8, 2025
