Qualified Charitable Distributions
The use of Qualified Charitable Distributions (QCDs) offers a tax advantaged way for those donors over the age of 70 ½ to make contributions to their church. The use of a QCD requires that the donor(s) have some form of tax deferred savings plan, IRA, 403(b) or 401(k).
The rules governing QCDs are very specific:
- The IRA owner must be at least 70 ½ years of age.
- The gift must result from a direct transfer from the trustee to the church.
- QCDs may also be used to fund endowments through the Georgia United Methodist Foundation.
- The amount of the gift is limited to $100,000 in a single tax year.
- The donor does not get a charitable deduction for the gift (it is also not counted as income).
- Transfers must come from an IRA. (If assets are in a 403(b) or 401(k) those assets must be rolled into an IRA).
- QCDs cannot be used to fund a Charitable Gift Annuity or a Charitable Remainder Trust.
- If you have no tax liability, the QCD doesn’t provide a benefit for you.
- It may still be better to donate appreciated securities (and using that charitable deduction to offset the Required Minimum Distribution income, while also avoiding capital gains taxes) than pursuing the Qualified Charitable Distributions. Please contact your tax advisor.
- Depending on your income, you may decide to donate BOTH appreciated securities AND use the QCD.
Below are four examples of how this method of giving is tax advantaged.
IRA QUALIFIED CHARITABLE DISTRIBUTION ADVANTAGE # 1
IRA Distribution$60,000
Social Security: Wife$24,000
Social Security: Husband$22,800
Total Deductions$38,400
Assumes a $10,000 gift to the church
Option 1: Tax without QCD$ 7,099
Option 2: Tax with QCD$ 5,816
QCD BENEFIT IN TAX SAVINGS $ 1,283
IRA QUALIFIED CHARITABLE DISTRIBUTION ADVANTAGE #2
IRA Distribution$30,000
Social Security: Husband$15,000
Social Security: Wife$12,500
Total Deductions$14,200
Assumes a $6,000 gift to the church
Option 1: Tax without QCD$ 1,408
Option 2: Tax with QCD$ 508
QCD BENEFIT IN TAX SAVINGS $ 900
IRA QUALIFIED CHARITABLE DISTRIBUTION ADVANTAGE #3
IRA Distribution$30,000
Social Security: Widow$15,000
Total Deductions (standard)$7,750
Assumes a $4,500 gift to the church
Option 1: Tax without QCD$ 3,474
Option 2: Tax with QCD$ 2,260
QCD BENEFIT IN TAX SAVINGS $ 1,214
IRA QUALIFIED CHARITABLE DISTRIBUTION ADVANTAGE # 4
IRA Distribution$25,000
Social Security: Husband$15,000
Social Security: Wife$12,500
Total Deductions:$14,200
Assumes a $3,000 gift to church
Option 1: Tax without QCD$ 658
Option 2: Tax with QCD$ 209
QCD BENEFIT IN TAX SAVINGS $ 449
If you have any questions or would like more information, please feel free to call Nancy Young, Director of Planned Giving of the Georgia United Methodist Foundation at 770.449.6726 or 877-220-5664.
Georgia United Methodist Foundation
15 Technology Parkway South • Suite 125 • Peachtree Corners, GA 30092-2928
770.449.6726 • 877.220.5664 • Fax: 770.449.6680
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