Strategic Giving: How QCDs and DAFs Can Elevate Your Financial Plan

At Sequoia Financial Group, we believe the most effective financial plans are those that integrate numerous facets of your financial life—investment strategy, estate planning, tax planning, retirement planning, risk management, and charitable giving. When these elements work in harmony, you can be better positioned to meet your goals while making a meaningful impact.

Among the many strategies we help clients navigate, qualified charitable distributions (QCDs) and donor-advised funds (DAFs) are two powerful tools for tax-efficient philanthropy. Because these giving methods touch multiple areas of planning, they often serve as key conversation points when aligning philanthropic intent with overall financial strategy.

Whether you’re already committed to giving back or just beginning to consider charitable options, here’s a closer look at how QCDs and DAFs can support your legacy while offering valuable tax advantages.

Qualified Charitable Distributions (QCDs)

A QCD is a direct transfer of funds from your IRA to a qualified charitable organization. For eligible individuals, this strategy offers a compelling way to reduce taxable income while supporting the causes that matter most to them. Here’s what you need to know:

• Age Requirement: You must be at least 70½ to make a QCD.
• Annual Limit & RMD Satisfaction: In 2025, you can direct up to $108,000 per person, per year to qualified charities through Qualified Charitable Distributions (QCDs). These contributions can also satisfy all or part of your Required Minimum Distribution (RMD) for the year.
• Eligible Accounts: QCDs can be made from traditional, inherited, SEP, or SIMPLE IRAs (assuming the SEP or SIMPLE IRA is inactive). 401(k) and 403(b) accounts do not qualify directly, but funds can be rolled into an IRA to enable a QCD.
• Ineligible Recipients: QCDs cannot be directed to donor-advised funds or private foundations.
• Tax Reporting: While the distribution is reported on Form 1099-R as taxable, the taxpayer must properly exclude it from income when filing. QCDs do not count as itemized charitable deductions on Schedule A.

A DAF is a charitable investment account used to support nonprofits over time through donor-directed grants. DAFs offer flexibility, tax benefits, and a way to create a long-term giving legacy. Key features include:

• Eligible Contributions: Cash and long-term, appreciated securities (e.g., stocks, bonds, mutual funds, ETFs), and other complex assets (e.g., business interests, real estate) can be contributed. Donating appreciated securities or complex assets may allow you to avoid capital gains taxes. In the case of appreciated securities, you may receive a deduction for the fair market value.
• Tax Deduction Timing: The deduction applies in the year the contribution is made—not when grants are distributed.
• No Granting Requirement: There’s no required annual distribution by law, allowing you to take your time in choosing how and when to give. Some DAF providers may have their own requirements for how often grants must be made.
• Legacy Options: You can name successors to continue granting from the account after your passing, extending your impact across generations.

Bringing It All Together

Understanding how QCDs and DAFs fit into your broader financial picture can transform your charitable giving from a standalone act into an integrated strategy. These tools may provide significant tax benefits and support long-term philanthropic intent by aligning with your values and financial goals.

If this overview sparks questions or inspires you to more deeply consider your vision for charitable giving, we invite you to connect with your Sequoia Financial Group advisor. We’re here to help you give with greater purpose and clarity—today and in the future.