Give from the account the IRS is waiting on

Quick answer: Once you're 70½, you can send money straight from an IRA to a charity and keep it out of your taxable income. If you own appreciated stock, give the shares instead of cash. Check current limits at IRS.gov before you move anything.

Most retirees give the same way they did at forty. They write a check from checking, or hand over a card at the door. It's generous. It's also frequently the priciest way to do it.

You already paid tax on the money in your checking account. The money in your traditional IRA hasn't been taxed yet, and the IRS is patiently waiting for it. Give from that account and the gift comes out of dollars that would have been taxed, so you skip the tax on them.

This is general education, not individual financial, legal or tax advice. Run your own numbers past a fee-only fiduciary adviser or a CPA before acting.

The move built for retirees: the QCD

A qualified charitable distribution, or QCD, is a transfer from your IRA directly to a qualified charity. You must be at least 70½ when you do it. The money never touches your hands, and it doesn't count as taxable income.

Notice that you don't deduct it. It simply never shows up as income. That distinction matters, and it's the reason a QCD beats a regular gift for a lot of people.

Why? Most retirees take the standard deduction, because the mortgage is paid down and there isn't much else to itemize. If you take the standard deduction, a cash gift to charity may save you nothing at tax time. A QCD saves you tax anyway, because it lowers your income before the deduction question even comes up.

It also counts toward your required minimum distribution, the amount the IRS forces you to withdraw each year once you reach the required age. That age is currently 73 and is scheduled to rise to 75 for younger retirees. Check IRS.gov for where you land. If you don't need the RMD to live on, a QCD lets you satisfy it without paying tax on money you were going to give away anyway.

An example, clearly labeled as one: Say a married retiree has a $20,000 RMD and wants to give $5,000 a year to a charity. Pay it by check from savings, and the full $20,000 is income, with no deduction under the standard deduction. Send $5,000 as a QCD, and only $15,000 is income. At an assumed 22 percent federal bracket, that's roughly $1,100 less federal tax. Your bracket, state and situation will differ.

The lower income can also ripple outward. Your adjusted gross income helps determine how much of your Social Security is taxed and whether you pay higher Medicare premiums. Medicare.gov and SSA.gov explain those thresholds, and they change.

The rules that trip people up

• Direct only. The money goes from the IRA custodian to the charity. If you take the cash first and write your own check, it's an ordinary withdrawal. Have the custodian pay the charity, or send you a check made out to the charity.
• IRAs only. A QCD generally can't come straight from a 401(k). Roll the money to an IRA first, and ask your plan administrator how long that takes.
• Qualified charities only. Donor-advised funds and private foundations don't qualify for QCDs. Look up any charity in the IRS Tax Exempt Organization Search before you send a dime.
• Keep the receipt. Get a written acknowledgment from the charity. Your tax preparer will also need to see how the QCD is reported on your return, since the custodian's tax form won't flag it for you.
• The annual cap. There's a per-person yearly limit, indexed for inflation. It's more than most people will ever give, but confirm the current figure.

Give the shares, not the cash

If you own stock or a fund in a regular taxable account that has climbed in value, don't sell it to fund a gift. Give the shares.

Another labeled example: Shares you bought for $10,000 are now worth $30,000, and you've held them more than a year. Sell them and give the cash, and you owe capital gains tax on the $20,000 gain. At an assumed 15 percent federal rate, that's $3,000, and the charity receives $27,000 at best. Give the shares directly, and the charity receives the full $30,000. You owe no tax on the gain. If you itemize, you may also deduct the market value.

Charities are tax-exempt, so they sell the shares and pay nothing. The tax simply disappears.

Two cautions. Hold the shares more than a year, or the deduction rules get less friendly. And don't give away shares that have lost value. Sell those, take the loss, and give the cash instead.

Bunching: for the years you do itemize

If your giving is modest, you probably won't clear the standard deduction in a normal year. The workaround is bunching. Instead of giving $6,000 a year for three years, you give $18,000 in one year and take the standard deduction in the other two.

The usual tool is a donor-advised fund. You contribute a large sum once, claim the deduction that year, and then recommend grants to your charities over time. The gift to the fund is irrevocable, so be sure. Funds charge fees, and sponsors set their own minimums.

Rules on deductions for people who don't itemize have been changing in recent years, so confirm what applies to your tax year before you plan around it.

The quietest big gift: your beneficiary form

Here's the mistake that costs heirs real money. Someone leaves their traditional IRA to the kids and their taxable stocks to the church or charity of their choice. It's backward.

Your children owe income tax on a traditional IRA they inherit, and the rules generally make them empty it within ten years. A charity pays no tax on it at all. Appreciated stock in a taxable account is the opposite: heirs generally get a stepped-up cost basis at your death, which wipes out the built-in gain.

So leave the pre-tax IRA to charity, and leave the kids the assets that come to them cheaper. You do it with a beneficiary designation form, which takes about twenty minutes. And remember that form overrides your will, a point covered in Your Will Doesn't Control Most of Your Money. Talk to an estate attorney before changing anything, since the details depend on your family and your state.

Give from surplus, and keep your guard up

Generosity is a good habit. It's also a habit scammers target. Anyone who pushes you to give today, wants a gift card, or won't let you check them out first gets a no. A real charity is happy to send you something in writing and let you think it over.

Same goes for the pressure that comes from people you love. Help your family first, and give what you can afford. But don't hand over the money that keeps you from becoming a burden on those same kids. Settle your plan for spending before you settle your plan for giving. Which Retirement Account To Spend From First is a good place to start.

And if money isn't what you have to give, what volunteering in retirement actually costs and pays covers the other kind of generosity, including the mileage you may be able to deduct.

Before the next RMD comes due, call your IRA custodian and ask how they process a QCD. Then decide who gets the check.