Giving to Faith Using a Qualified Charitable Distributions (QCDs)

• Are you at 70 ½ years old or older?
• Do you have an investment/retirement account that the government requires you to take an annual Required Minimum Distribution (RMD)?
• If eligible, would you want to reduce your taxable income
• Do you wish to support Faith Episcopal?

Using a Qualified Charitable Distribution (QCD), you may be eligible to support Faith Episcopal and lower your taxable income.  This information is provided to help you discuss this matter with your TAX ADVISOR OR PREPARER. If you are interest in making a charitable gift through your estate plan click here.

When contributing to Faith Episcopal Church you might consider making your donation through a QCD and at the same time be able to satisfy your IRS' Required Minimum Distribution (RMD).

A QCD is a direct transfer of funds from your IRA custodian, payable to a qualified charity such as Faith Episcopal Church. QCDs can be counted toward satisfying your required minimum distributions (RMDs) for the year, as long as certain rules are met.  If your IRA custodian makes the check payable to you and you pass it on to the charitable organization it will NOT be a QCD and will not provide any tax benefit.  The check MUST be made payable to the charity of your choice.

In addition to the benefits of giving to Faith Episcopal, a QCD excludes the amount contributed from taxable income, which is unlike regular withdrawals from an IRA. Keeping your taxable income lower may reduce the impact to certain tax credits and deductions, including Social Security and Medicare.

Also, QCDs don't require that you itemize, which due to the recent tax law changes, means you may decide to take advantage of the higher standard deduction, but still use a QCD for charitable giving.

Can I make a QCD?

While many IRAs are eligible for QCDs—Traditional, Rollover, Inherited, SEP (inactive plans only), and SIMPLE (inactive plans only)* —there are requirements:

  • You must be 70½ or older to be eligible to make a QCD.
  • QCDs are limited to the amount that would otherwise be taxed as ordinary income. This excludes non-deductible contributions.
  • The maximum annual amount that can qualify for a QCD is $100,000. This applies to the sum of QCDs made to one or more charities in a calendar year. (If, however, you file taxes jointly, your spouse can also make a QCD from his or her own IRA within the same tax year for up to $100,000.)
  • For a QCD to count towards your current year's RMD, the funds must come out of your IRA by your RMD deadline, generally December 31.

Any amount donated above your RMD does not count toward satisfying a future year's RMD.

Funds distributed directly to you, the IRA owner, and which you then give to charity do not qualify as a QCD.

What kind of charities qualify?

Faith Episcopal Church, as a 501(c)(3) organization, is an eligible charity to receive tax-deductible contributions.

Some charities do not qualify for QCDs. Before contributing to any organization you should consult your tax advisor.

Tax reporting

A QCD is reported as a normal distribution on IRS Form 1099-R for any non-Inherited IRAs. For Inherited IRAs or Inherited Roth IRAs, the QCD will be reported as a death distribution. Itemization is not required to make a QCD. While the QCD amount is not taxed, you may not then claim the distribution as a charitable tax deduction.

A QCD is not subject to withholding. State tax rules may vary, so for guidance, consult a tax advisor.

When making a QCD, you must receive the same type of acknowledgement of the donation that you would need to IRS Gov’t Publication claim a deduction for a charitable contribution.

A tax advisor can help you determine if both your IRA and charity qualify for QCDs.

Note*  Per the IRS, a SEP or SIMPLE IRA is considered active if it has been maintained under an employer arrangement under which an employer contribution is made for the plan year ending with or within the IRA owner's taxable year in which charitable contribution would be made.

Sources:
https://www.irs.gov/publications/p590b#en_US_2018_publink100041439 and https://www.fidelity.com/building-savings/learn-about-iras/required-minimum-distributions/qcds