What is a Qualified Charitable Distribution?

Do you like it when the government requires you to withdraw money from your IRA? Do you like paying more than your fair share of taxes?

And, if you are older than 70½ years old and would rather see your blessings help your Desert Mission Church while benefiting your financial security, consider making a Qualified Charitable Distribution (QCD).

IRA owners who are 70½ may direct up to $100,000/year of IRA distributions to charity, called a QCD. The donations count toward the donor’s Required Minimum Distribution (RMD) but does NOT increase the donor's Adjusted Gross Income (AGI) or generate a tax bill.

Keeping the donation out of the donor's AGI is important because doing so can:

(1) help the donor qualify for other tax breaks (for example, having a lower AGI can reduce the threshold for deducting medical expenses, which are only deductible to the extent they exceed 10% of AGI (for 2018 and thereafter);

(2) reduce taxes on the donor's Social Security benefits; and/or

(3) help the donor avoid a high-income surcharge for Medicare Part B and Part D premiums (which kick in if AGI is over certain levels).

Further, because charitable contributions will not yield a tax benefit for those taxpayers who no longer itemize their deductions (thanks to the larger standard deduction for 2018 and thereafter), those who are age 70½ or older and are receiving required minimum distributions from IRAs, may gain a tax advantage by making annual charitable contributions by way of a QCD from their IRA. This charitable contribution will reduce RMDs by a commensurate amount, and the amount of the reduction will be tax-free.

Please consult your tax advisor for your specific situation and consider making a Qualified Charitable Distribution to your Desert Mission United Methodist Church!