IRA owners who are over 70 can make up to $100,000 in tax-free charitable donations a year with Qualified Charitable Distributions (QCD). The funds go directly to a qualifying charity and satisfy the Minimum Distribution requirement from an IRA.
Several parishioners have used QCD's to make donations to pledges and campaigns such as Warm Regards. Parishioner and accountant, Roger Miller gives details below.
Who Qualifies
Individuals who have reached 70 ½ by the date of the distribution.
Have funds in a Traditional IRA, Inherited IRA, inactive SEP plan and/or an inactive SIMPLE plan.
Maximum Distribution
$100,000 per year per taxpayer. There is no minimum however paperwork requirements may outweigh the benefit received.
Distribution Requirements
QCD must be made directly by the custodian/trustee of your IRA to St. Peter’s Episcopal Church and be made when the individual is at least 70 ½.
The money can be a direct transfer that never passes through the hands of the IRA holder. Instead, the IRA custodian/trustee can either send a check directly to the charity or to the account owner, who then hands it over to St. Peter’s Church. However, in either case the check must be made payable to St. Peter’s Episcopal Church.
If the QCD check will be sent by the IRA custodian/trustee directly to St. Peter’s Church then the office should be notified it is coming and you should provide the office/finance committee of how you want the funds to be allocated among the various giving opportunities.
If the QCD check is sent by the IRA custodian/trustee to you then you should deliver the check to the office or put it in the collection plate along with how you want the funds allocated among the various giving opportunities.
IN NO CASE SHOULD YOU RECEIVE THE FUNDS INTO ANY OF YOUR PERSONAL ACCOUNTS AND THEN RIGHT A CHECK TO ST. PETER’S CHUCH NOR SHOULD ANY CHECK MADE PAYABLE TO YOU BE ENDORSED OVER TO ST. PETER’S CHURCH.
Advantages
IRA distributions that are Qualified Charitable Distributions are not includable in income. The benefit to the taxpayer is that the contribution is an “above the line” deduction in calculating adjusted gross income, provides a charitable deduction to those that do not itemize their deductions, and prevents the phase out of other tax deductions.
For people subject to Required Minimum Distributions (RMD’s), the QCD counts towards the taxpayers Required Minimum Distribution requirement.
Miscellaneous Items
Special rules apply is you are over 70 ½ and still contributing to a Traditional IRA. Not all of the QCD may be deductible.
Special rules apply if you are making a QCD from a Traditional IRA that has “Basis”. These would be IRA accounts that contain “non-deductible” contributions.
If you are married filing joint or married filing separately each of you would be entitled to the benefits detailed above.
QCD’s must be received by St. Peter’s Church by 12/31 of the year intended.
Mechanics of Distribution
The IRA custodian/trustee will require you to fill out a form, either online or paper copy requesting the distribution. Complete the requested information and when it comes to how much federal tax to withhold enter 0 (zero) because the distribution is not subject to federal tax and enter 0 (zero) for state withholding if you are a PA resident because the distribution is not subject to PA tax. If you are an out of state resident, you should withhold your applicable tax depending on your particular state’s tax laws.
The method of requesting the distribution will vary depending on the custodian/trustee.
Disclaimer: The above information is not a complete list of tax rules regarding Qualified Charitable Contributions and are presented only as a guide to determine whether a QCD would benefit some parishioners.
The QCD may not be good for all people. There are a multitude of more complicated considerations regarding taxes that are beyond the scope of what I have covered here. Parishioners should contact their tax professional regarding the advantages, disadvantages, or alternative methods of contributing to St. Peter’s Church.
While I am not accepting any new clients, I would be available to meet with any parishioners that would like additional information regarding the QCD process. I would review their personal situation and make a determination as to whether it would be beneficial to them. In addition, I can make myself available to anyone needing assistance with filling out the required paperwork required by the custodian/trustee to facilitate the QCD if they so desire.
If you would like additional information and advice, contact parishioner Roger Miller at RAMillerCPA@aol.com.
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