by HUUC Treasurer Rebecca Pace, CPA
We all work together to be sure Heritage Universalist Unitarian Church has the money it needs to keep our community strong.
While it’s personally gratifying to know we all have a part in making our church a warm and welcoming place, it’s disappointing that many of us no longer get a tax benefit for our contributions.
Under current tax law most retirees must start Required Minimum Distributions (RMD) from their retirement accounts at age 73. These distributions are usually 100% taxable. They increase the tax burden on your federal and state returns and may even cause your Medicare premiums to increase, under the Income-Related Monthly Adjustment Amount rules.
If you are subject to RMDs you can reduce the tax burden with a Qualified Charitable Distribution (QCD). You don’t need to wait until you are 73. Anyone over 70 ½ can use this strategy that will pay off on their tax return as they are helping the church.
The QCD can be more or less than the RMD. You can make more than one QCD if you want to benefit more than one organization. Some people even set up special IRA checking accounts to make their donations personally. Remember the QCD must go directly from the IRA to the charity, without passing through your personal account.
Qualified Charitable Distributions allow anyone over 70 ½ to make a tax-free contribution directly to the church, or other charity, from their Individual Retirement Account (IRA). An individual can contribute as much as $108,000, in 2025. If they are still adding to the IRA, the limit may be reduced.
There are a few things you have to watch for.
- The check from the IRA must be made payable to the church. Ask your financial advisor to set it up for you or go on line and follow the steps carefully. In most cases the paperwork is minimal.
- You will get a 1099-R for the amount of this distribution. You need to report the full distribution as income on your return, and enter the QCD as an offsetting amount. Don’t let anyone tell you to simply show it as an itemized deduction.
- You still need a written acknowledgement from the church reporting the contribution date, amount, and confirmation that no goods or services were received.
Even a small QCD can make a significant difference in your tax bill. If you think you want to itemize deductions, reconsider. A QCD reduces your state income taxes, too. An itemized deduction will not do that.
This year, the QCD strategy may be more important than ever for anyone who is getting back payments from Social Security due to the Fairness Act. Retired public sector workers may see a boost in taxable income from the lump-sum Social Security payment.
Ask your financial or tax advisor about what a QCD can mean for you.
For more information on QCDs access the following articles: https://www.schwab.com/learn/story/reducing-rmds-with-qcds and https://www.irs.gov/newsroom/give-more-tax-free-eligible-ira-owners-can-donate-up-to-105000-to-charity-in-2024
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