IRA Qualified Charitable Distribution
On December 18th, 2015, the President signed into law the Protecting Americans from Tax Hikes (PATH) act, which includes a permanent extension of the Charitable IRA Rollover. Donors may now take advantage of the opportunity to make a Charitable IRA Rollover (also known as a Qualified Charitable Distribution)--a nontaxable distribution made directly by the administrator of an IRA to a qualified public charity.
A Qualified Charitable Distribution (QCD) is a great way for individuals that are over 70 &1/2 years old with an IRA and a need to withdraw funds to meet a Required Minimum Distribution (RMD), to make a contribution to Westwood Baptist Church. The money you contribute to Westwood using a QCD is not included in your adjusted gross income on your tax return which is a better option than listing the donation as a simple charitable contribution. According to the IRS:
A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax deductible contributions. You must be at least age 70½ when the distribution was made. Also, you must have the same type of acknowledgment of your contribution that you would need to claim a deduction for charitable contribution. See Records To Keep in Pub. 526.
The maximum annual exclusion for QCDs is $100,000. Any QCD in excess of the $100,000 exclusion limit is included in income as any other distribution. If you file a joint return, your spouse can also have a QCD and exclude up to $100,000. The amount of the QCD is limited to the amount of the distribution that would otherwise be included in income. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of otherwise taxable income.
Qualified Charitable Distribution benefits include:
- The gift comes from your IRA, using pre-tax dollars.
- The gift amount is excluded from your taxable income.
- The gift amount can be applied towards this year's minimum distribution requirements.
Basic requirements and limitations for a Qualified Charitable Distribution include:
- The donor must be at least 70½ years of age at the time of the distribution.
- The distribution must be from a Roth or Traditional IRA.
- The distribution must be made directly from the IRA administrator to a qualifying charity, like Westwood Baptist Church, a qualified 501(c)(3) organization.
- Qualified Charitable Distributions are limited to $100,000.00 per individual per year (a spouse who qualifies may give a similar amount from his or her IRA).
Can donors contributing IRA assets to a charity claim a tax deduction?
No, because a contribution to a qualified charity is not taxed as income under the IRA Rollover provision, the donor cannot claim a tax deduction for that contribution.
To make an IRA qualified charitable distribution to the Church that includes tithing or other funds, a donor should:
- Instruct your IRA administrator to make the check payable to Westwood Baptist Church (TIN 63-0803259) and send the check addressed as follows:
Westwood Baptist Church
P O Box 630
Alabaster, AL 35007
- Notify the Financial Office by mail to the above address or by email to email@example.com that the distribution is being made. Include the donor’s name, Church record number, mailing address, name of IRA administrator, exact amount contributed, and allocation of the donation among tithing, or other funds of the Church. This will help ensure that the donation is credited properly.
A donor may contact the Financial Office at 205-664-0122 if there are questions or additional information is needed. The Financial Office will mail an acknowledgment letter or statement to the donor using the physical address on file in their church membership record.
If you have questions, you should contact your financial advisor, accountant, or tax preparer. Additional information can be found here.
The foregoing information is intended as general information only and is not intended as legal, tax, or other professional advice. Donors and others should consult their own tax professional(s) for specific legal or tax advice on this matter.