Making the Most of your Giving


Are you nearing the age of 70? Do you have an IRA? What ways are you trying to faithfully give to your church?  Here’s some advice about how to give charitably and making the most out of it.

As you know, and likely loathe, each year those over 70.5 years of age with Traditional IRAs have to take Required Minimum Distributions, or RMDs. Normally, distributions from Traditional IRAs are 100% taxable as ordinary income.

The Qualified Charitable Distribution is a way to end the feeling of dread associated with these RMDs, while also fulfilling your giving to the church in a tax-preferred way. In fact, if you want to make a big splash, each individual can give up to $100,000 per year from an IRA through the program.

QCDs are not reported as income, ever. Consequently, no charitable deduction on schedule A of your tax return is claimed. Although it seems like the results would be the same if you included the IRA distribution as income, contributed the same amount to charity, and then deducted the charitable contribution on your return, the results are vastly different.

Here’s why QCDs are so powerful:
  1. You only get charitable tax credit if you itemize, normally. Here, Individuals who claim the standard deduction can benefit from the full charitable contribution, even though they do not itemize. This is going to be a very BIG factor if the tax reform package does, indeed, double the standard deduction for filers.
  2. There are income limits on how much each of us can deduct, normally. The full amount of a QCD is excluded from income, even when the charitable contribution exceeds the 50 percent adjusted gross income (AGI) limit on charitable contributions.
  3. RMDs increase our overall income, which affects other items. Distributions directly to charities keeps AGI lower, which is beneficial when calculating other items, such as taxability of social security, medical expense floors, miscellaneous deduction floors, and the investment surtax.

It doesn’t matter if you are giving weekly, monthly, quarterly or yearly; do your giving from your IRA. Simply have your IRA custodian make your contributions directly to the church and watch your tax efficiency grow!

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Adrian Young

Adrian is a member of St. Peter’s and a certified financial planner. He serves on the St. Peter’s Stewardship Committee.

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