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  • Kim Montgomery

Making sense of those QCD's


I'm sure by this point you've either received a Qualified Charitable Distribution (QCD) or have had parishioners approach you asking about how to make a QCD from their IRA to the parish.


This has become a very popular way to contribute to parish offertory. Despite what you may have heard, it's a relatively simple process to set up. And, did you know that a QCD doesn't necessarily have to be set up as a lump sum distribution at the end of the year. Parishioners can even set up a QCD to be distributed monthly.


But, before we delve deeper into the process of contributing from an IRA or the benefits of QCD's, let's define what exactly is a Qualified Charitable Distribution.


What is a Qualified Charitable Distribution?

A Qualified Charitable Distribution, also often referred to as a QCD, is generally "an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity." (www.irs.gov)


Per the IRS, "qualified charitable distributions can satisfy all or part of the amount of your required minimum distribution from your IRA" as long as the following criteria are met:

  • The distribution must be made to a qualifying charitable organization (your parish meets that criteria)

  • The donor must be age 70 ½ or older at the time of transfer

  • The maximum amount a donor may transfer is $100,000

  • The gift must be transferred directly from the IRA to the parish

How can a Parishioner make a QCD?

When parishioners contact you inquiring how they too can make a gift to the parish from their IRA, direct them to contact their IRA administrator. The IRA administrator will provide the necessary forms to be filled out and walk them through the process. Unfortunately, or fortunately, there is nothing you can do to facilitate the distribution. This type of gift must be initiated by the parishioner.


Once the distribution has been requested by the parishioner, the parish should receive that distribution in the form of a check directly from the IRA.


It is important to note, again, that the distribution must be directly from the IRA to the parish. Parishioners may not withdraw the money from the IRA and then write a check to the parish.


Promote the benefits of making QCD's

QCD's have become more popular since Congress made the QCD rule permanent in 2015. They're also becoming widely utilized because of the tax benefits to the donor. According to investopedia.com "Required minimum distributions (RMD) from IRAs can be a burden for many a taxpayer, uncomfortably boosting their annual income, sometimes even into a higher bracket. But there's a way to do good with the RMD, both for others and for one's own bottom line."


Since this rule allows parishioners 70 ½ or older who own traditional IRA's to exclude their required minimum distributions (RMDs) from their adjusted gross income if they make a QCD to a qualified charitable organization, like your parish, it is worth promoting.


A QCD can also be made from a Roth IRA, however the same benefits would not apply as distributions from Roth IRA's are already tax-free.


Below is sample text you can use in the bulletin, on facebook, etc... to promote Qualified Charitable Distributions


Sample QCD Promotional Text:

Want to reduce your taxes while supporting our ministry...

If you are 70 ½ or older, contributing to the parish directly from your traditional IRA may be the answer. You know that Required Minimum Distribution (RMD) you must take and claim as taxable income. Well, you can contribute all or part of your RMD (up to $100k) to the parish and not claim those monies contributed as taxable income. By lowering your adjusted gross income, the QCD rule can effectively reduce your income taxes.


These Qualified Charitable Contributions (QCD) can be set up to distribute to the parish annually or even monthly. Some criteria has to be met to do this, however, the process is simple. Contact the administrator of your IRA for more information on how to arrange a QCD and as always, please reach out to your tax advisor to be sure you qualify and this is the right option for you.


Qualified Charitable Distribution Criteria:

  • The distribution must be made to a qualifying charitable organization (the parish meets this criteria)

  • The donor must be age 70 ½ or older at the time of transfer

  • The maximum amount a donor may transfer is $100,000

  • The gift must be transferred directly from the IRA account to the parish


To read more about QCD's - Per the IRS https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals


Referenced Article about QCD's

https://www.investopedia.com/articles/financial-advisors/032116/how-use-qcd-rule-reduce-your-taxes.asp

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