If you are over 70½ years of age and have an IRA, you must take a required minimum distribution (RMD) every year. These withdrawals are normally fully taxable. By using a special IRA distribution method called a Qualified Charitable Distribution (QCD), you can make a charitable gift to the United Church of God from your taxable IRA distribution.
With the IRS doubling the standard deduction to $24,000 for couples ($12,000 for singles), those who used to get a deduction for their tithes and offerings on their tax returns may no longer reach this threshold. Therefore, if you make a donation to the Church (whether tithes or offerings) on any of these earnings, unless your total itemized deductions are over $24,000, there is no tax advantage for these donations. Thus, taking advantage of this special provision (QCD) allows you to donate directly to the Church from your IRA, thus lowering your adjusted gross income.
Using a QCD may also help you lower or eliminate your Social Security benefit taxation, the alternative minimum tax or the 3.5% investment surtax. And it may keep you from being bumped into a higher marginal tax bracket.
For a QCD to count toward your current year’s RMD, it must be made before the end of the calendar year. The funds must be distributed directly from the IRA account, being made payable to United Church of God, an International Association.
Many of us also have 401(k) or 403(b) tax deferred annuities (TDAs). These are not eligible for a QCD. However, you are allowed to move or “rollover” a 401(k) or 403(b) tax free into an IRA. Then you will be qualified to use the QCD from that IRA to effectively get a direct tax break from the gift to the Church without having that withdrawal counted as taxable Federal Income.