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.
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