Practical Matters for Giving Faithfully
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)
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.
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 72 years of age 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 a traditional IRA owned by an individual who is age 72 or older that is paid directly from the IRA to a qualified charity. IRA owners who are 70½ can make a charitable rollover gift from their IRA to nonprofit organizations and pay no tax on the gift.
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 distribution, 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?
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.