By Travis Pearson
I’ve received quite a few questions about Congress permanently extending the IRA Qualified Charitable Distribution. So, I thought I would put together a road map for folks to use in considering whether making this type of gift makes sense for them.
If you are 70 1/2 or older, you can make a gift from your IRA account to help support the work of your parish or other diocesan ministry this year and benefit nicely from it, along with helping the church – have it count toward your Required Minimum Distribution, with zero taxes paid by you or the ministry of your choice, on the entire gifted amount.
Why make an IRA qualified charitable distribution gift?
An IRA Qualified Charitable Distribution, or QCD, gift is a way for you to support your parish or other ministry today without impacting your checking or savings account balance. QCD gifts made from your IRA (up to $100,000 per year) are not reportable as taxable income. They also count toward your required minimum distribution (RMD) and therefore can lower your income and taxes.
In addition, making an IRA QCD may prevent you from: being bumped into a higher federal and/or state income tax bracket; hitting the phase-outs on your deductions and personal exemptions; or, falling into the Alternative Minimum Tax (AMT) or incurring the Affordable Care Act (ACA) tax.
You can benefit from giving from your IRA if:
• You wish to make a significant gift without using cash or other assets.
• You do not need all or a portion of your IRA income.
• You are paying too much in taxes and are looking to reduce your income and tax liability.
• You either itemize deductions or not. Because a QCD gift can reduce your income and taxes, you can still benefit from charitable giving even as a non-itemizer.
• You want to give over and above your normal giving this year. An IRA QCD gift does not count towards the 50 percent annual limitation on charitable gifts.
What if you have a 401(k), 403(b) or other retirement plan?
This gift opportunity only works for IRAs. If you own another type of qualified retirement plan, you must first make a tax-free rollover of funds into an IRA. Then you can make the gift from the IRA account to support your parish or other ministry.
How can I make an IRA rollover gift?
Contact your IRA plan administrator to learn their procedure for making a QCD gift to your parish or other chosen ministry. To qualify, if must go directly from your plan to your parish or other chosen Diocesan ministry. If it is paid to you, it will be treated as a regular taxable distribution from your IRA. To learn more about the benefits of making an IRA charitable rollover gift, please contact us today.
Pearson is the Planned Giving coordinator for the Diocese of Wichita.