Practical Matters for Giving Faithfully

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The federal stimulus relief package (CARES Act) signed into law by the president on March 27, 2020, waived Required Minimum Distributions (RMDs) for 2020 to help individuals through the coronavirus pandemic.

Donating Your Required Minimum Distribution – It Can Benefit You and the Parish
IRS rules require individuals who are 72* or older to take required minimum distributions (RMDs) each year from their tax-deferred retirement accounts.

Learning the Benefit of a Qualified Charitable Distribution
If you do not need all or part of your required minimum distribution funds for living expenses, it may make sense for you to avoid paying taxes on your required withdrawal by donating all or part of your RMD from a traditional IRA directly to one or more 501(c)(3) charitable organizations like Immanuel Church-on-the-Hill. The qualified charitable distribution (QCD) can satisfy your required minimum distribution for the year.

​Knowing the Rules of a Qualified Charitable Distribution (QCD)

• Individuals must be 72* or older to make a qualified charitable distribution.
• For the qualified charitable distribution to count towards your RMD, the funds must come out of your account by the RMD deadline each year which is the end of the calendar year, December 31.
• Traditional IRA accounts are eligible for qualified charitable distributions. For questions about whether your tax-deferred account is eligible, be sure to consult your financial or tax advisor before taking any action.
• Funds must be transferred directly from the financial institution that manages your IRA to a qualified charity like Immanuel Church-on-the-Hill. The financial firm must issue a check from your IRA payable to the nonprofit organization like Immanuel Church-on-the-Hill. If the check is made payable to you, the distribution would not qualify as a qualified charitable distribution and would be treated as taxable income.
• If you wish, you can divide up the required minimum distribution to send to multiple 501(c)(3) charitable organizations.
• The maximum total annual distribution amount that can qualify for a qualified charitable distribution is $100,000.

Remember this. The tax-free transfer will not count if you withdraw the money from your IRA first and then you contribute it to charity. In this situation, the IRA withdrawal would be considered taxable income.

Always do this: Be sure to consult with your financial, tax and/or legal advisors before taking any action to ensure you’re making the right decision for you.

*The change in the Required Minimum Distribution age requirement from 70½ to 72 only applies to individuals who turn 70½ on or after January 1, 2020. Please be sure to consult your tax advisor about the impact of this change.

                 FREQUENTLY ASKED QUESTIONS

What is a required minimum distribution?
A required minimum distribution, also known as an RMD, is the minimum amount by law that the owner of a traditional IRA (individual retirement account) must withdraw from his or her traditional IRA in a year once the individual is age 70½ or older. The required minimum distribution amount is calculated based on specific federal tax rules.

What is a qualified charitable distribution?
Generally, a qualified charitable distribution (QCD) is a distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 72* or older that is paid directly from the IRA to a qualified charity.

Can a qualified charitable distribution satisfy my required minimum distribution from an IRA?
Yes. Your qualified charitable distributions can satisfy all or part of the amount of your required minimum distribution from your IRA.

Can I transfer funds from my IRA to another financial account of mine and then write a check to charity?
No. Doing this would eliminate the tax-free treatment of the contribution and would cause the amount distributed to be included in your taxable income. The Qualified Minimum Distribution must be paid directly from the financial firm managing the IRA to the charity and not to the IRA account holder.

Can I take a tax deduction for the amount given through a qualified charitable distribution?
No, you cannot take a tax deduction for the amount given via a qualified charitable donation, but remember, that amount is not a taxable distribution to the IRA owner.

Can I make a qualified charitable distribution to a Donor Advised Fund or Life Income Gift?
No.

As a reminder, before taking any action, be sure to consult with your financial, tax and/or legal advisors to ensure you’re making the right decision for your situation.