Qualified Charitable Distributions
For those who are older than 70½ and have an eligible IRA, a Qualified Charitable Distribution (QCD) directly to the church to fulfill a pledge or for some other donation may be advantageous for tax savings. The following Q&As on the subject may be helpful, but your final decision to use a QCD should be with the advice of your tax advisor.
What are the possible tax benefits of making my donation as a QCD?
A QCD, only subject to an amount restriction (see below), is not included in your “gross income” for tax purposes, nor is it considered a “deductible expense”. So, if you are making the decision as to whether to itemize your deductions or to use the standard deduction (recently more generous), the QCD from your IRA could make the standard deduction more attractive.
For example, if you are a joint filer and both older than 70½, your standard deduction is $27,400. So, if your deductible expenses medical, mortgage, etc. without the amount you want to donate to charities is less than the standard deduction, then you can save taxes by using the standard deduction and QCDs to donate to charities.
One note for NC income tax filers. NC has a smaller standard deduction than that for Federal taxes.
Are there other tax advantages for using a QCD?
There may be, e.g., there are certain thresholds of gross income that require larger annual premiums for Medicare. Your tax advisor will know these rules.
May I make a QCD donation to the church at any time during the year.
Yes. When the time is right to make a distribution from your IRA, e.g., the market is up, you may make a QCD to the church.
In fact, if your donation is to the Capital Fund (Building Project) it would reduce the amount the church will have to borrow when construction is completed, by March 2021.
For my tax year 2020 an RMD is not required from my IRA. Can I still make a QCD for the full amount I want to donate?
Yes, with one proviso. While you may withdraw (distribute) as much of your IRA as you want at any time even when it exceeds an annual RMD, your QCD is limited to only $100,000 in any given calendar year. Any amount more than $100,000 is considered as taxable income.
How do I create a QCD donation to the church?
The administrator of your IRA, e.g., your bank, should have a request form for you to complete to order the QCD. Depending on the organization of your administrator it could take as much as several weeks to complete the transaction.
Should you have further questions about QCD donations, please contact:
Andrew Wright awright76@gmail.com, Dana Lundquist: c3hfinance@gmail.com or Bill Poteat wopoteat@att.net
For those who are older than 70½ and have an eligible IRA, a Qualified Charitable Distribution (QCD) directly to the church to fulfill a pledge or for some other donation may be advantageous for tax savings. The following Q&As on the subject may be helpful, but your final decision to use a QCD should be with the advice of your tax advisor.
What are the possible tax benefits of making my donation as a QCD?
A QCD, only subject to an amount restriction (see below), is not included in your “gross income” for tax purposes, nor is it considered a “deductible expense”. So, if you are making the decision as to whether to itemize your deductions or to use the standard deduction (recently more generous), the QCD from your IRA could make the standard deduction more attractive.
For example, if you are a joint filer and both older than 70½, your standard deduction is $27,400. So, if your deductible expenses medical, mortgage, etc. without the amount you want to donate to charities is less than the standard deduction, then you can save taxes by using the standard deduction and QCDs to donate to charities.
One note for NC income tax filers. NC has a smaller standard deduction than that for Federal taxes.
Are there other tax advantages for using a QCD?
There may be, e.g., there are certain thresholds of gross income that require larger annual premiums for Medicare. Your tax advisor will know these rules.
May I make a QCD donation to the church at any time during the year.
Yes. When the time is right to make a distribution from your IRA, e.g., the market is up, you may make a QCD to the church.
In fact, if your donation is to the Capital Fund (Building Project) it would reduce the amount the church will have to borrow when construction is completed, by March 2021.
For my tax year 2020 an RMD is not required from my IRA. Can I still make a QCD for the full amount I want to donate?
Yes, with one proviso. While you may withdraw (distribute) as much of your IRA as you want at any time even when it exceeds an annual RMD, your QCD is limited to only $100,000 in any given calendar year. Any amount more than $100,000 is considered as taxable income.
How do I create a QCD donation to the church?
The administrator of your IRA, e.g., your bank, should have a request form for you to complete to order the QCD. Depending on the organization of your administrator it could take as much as several weeks to complete the transaction.
Should you have further questions about QCD donations, please contact:
Andrew Wright awright76@gmail.com, Dana Lundquist: c3hfinance@gmail.com or Bill Poteat wopoteat@att.net