Paul and Irene
Paz de Cristo has been one of our favorite charities for years because of its consistent and comprehensive services for our less fortunate neighbors. While I was working (generating earned income in IRS terms), I would donate monthly directly from my paycheck to Paz de Cristo through the Valley of the Sun United Way. At signup time, I would earmark Paz de Cristo as the United Way organization to receive our donation, knowing that we could claim most or the entire donation as an Arizona state tax Credit for Contributions to Qualifying Charitable Organizations (AZ Tax Form 321). Now that we are retired, we give in another tax efficient way. We don't have earned income anymore that would qualify for the credit above, but we are old enough to be subject to the Minimum Required Distribution from our Individual Retirement Accounts (IRAs). That is, we have to take a specified percentage out of our IRAs each year. That "income" is generally taxed as ordinary income except for any amounts given directly to charities, such as Paz de Cristo, using a Qualified Charitable Distribution. We just tell our broker the amount we wish to donate to Paz de Cristo and they write a check that goes directly from our IRA to Paz de Cristo. The entire donation becomes non-taxable for both Federal and State taxes. So, we continue to give to a great cause and save money on our taxes at the same time.