Skip to main content

Encouraging QCDs (Qualified Charitable Distributions) — Church and NFP Actions

By

Encouraging QCDs (Qualified Charitable Distributions) — Church and NFP Actions

Since January 1, 2018, generous supporters at least 70½ years old have enjoyed a new means of giving. No longer should they find themselves withdrawing funds from their Individual Retirement Accounts (and paying tax) only to make charitable contributions that have no tax deduction benefit.

To recall, these donors can have their IRA companies withdraw from their retirement investments, sending the distributions directly to the charities of their choice. They cannot deduct the amounts as tax write-offs, but neither do they owe tax on the distributions. These distributions also satisfy IRS rules for annual Required Minimum Distributions (RMDs) that are mandatory beginning at age 73.

How can your church or NFP assist these donors?

1.      Educate. Make sure your supporters understand QCD rules and processes. Encourage them to ask their IRA investment advisors for clear instructions to arrange direct IRA-to-charity funds transfers.

2.      Document. Donors must accurately report the IRA distributions that are QCDs on their Forms 1040. Your organization’s annual giving statements can help. While QCD gifts cannot be deducted as charitable contributions on your donors’ tax returns, contributors still must obtain written proof of them. As CPAs, we see some annual reports from churches and NFPs that are confusing. Record all their gifts on your statements, including QCDs. It’s up to the donors to know the rules. But you can help by providing annotations that list the source. For example, “from [Fidelity] IRA account of [Jane Doe].” If the donor is married, it is important to note which spouse’s IRA made the transfer.

Much more could be said about QCDs, but we’ll share just one more fact: the 2025 limit per spouse is $108,000. Inflation adjustments will result in greater future years’ limits.




Comments

Post a Comment

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

By
Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a...
Post a Comment
Read more

How can my ministry expenses be covered by the church?

By
     How can my ministry expenses be covered?                            Many ministers use their personal autos for ministry purposes. Their employers can reimburse these costs using a standard mileage rate published by the IRS. The per mile rate represents employees’ entire reimbursable cost other than highway tolls and parking tabs. If not covered by use of the ministries’ credit card, other costs can be reimbursed as well—business and travel meals, lodging, office supplies, and professional library purchases among them. Some ministries reimburse travel costs using per-diems published by the IRS. If employee business expenses are not reimbursed, the personal tax deduction benefit to the individual minister is severely limited. Non-taxable reimbursements after documentation is provided to the employer follows IRS rules for accountable plans. Non-taxable cash advances before expenses are in...
Post a Comment
Read more

What health insurance coverage can I get as a minister?

By
    What are my options for health coverage as a minister?                       Many churches and Christian organizations have discontinued providing employer-paid group health plans. In lieu of paying out extremely expensive, one-size-fits-all insurance premiums, some have opted to provide taxable stipends and let employees shop for their own coverage. The good news: you can choose your own. The bad news: the stipend may not be enough and securing coverage can be complicated. Health care sharing plan options can be more economical. But they don’t qualify as standard health insurance: health care providers can balk, and the monthly subscriptions are not tax deductible. The Marketplace ( www.healthcare.gov ) offers alternatives, including advance premium tax credits to help with the monthly costs. Watch out for unpleasant surprises, however, since the tax credits must be reassessed when you file your annual Form...
Post a Comment
Read more