by Rebecca A. Pace, CPA/PFS, HUUC Accounts Receivable Treasurer

I want to be sure you are aware of a tax savings strategy that many members of Heritage are using to support our church: Qualified Charitable Distributions or QCDs.

If you are over 70 ½ you can have a distribution from your IRA sent directly to the church, and not pay any tax on the withdrawal. If you are already taking withdrawals from your IRA and making charitable contributions out of your pocket, this method will reduce your Adjusted Gross Income, and your income tax. It may reduce the taxable portion of your Social Security. It also reduces the income that is taxable to the State of Ohio. A simple charitable deduction cannot do all of these things.

If you are over 72, these distributions count towards your Required Minimum Distribution (RMD).

You will get a tax statement from the church, acknowledging your gift. In most cases the statement will indicate if the donation came from your IRA, but it is your responsibility to verify the exclusion limitations and determine if the contribution qualifies as a QCD.

Remember, IRA means “Individual.” The distribution comes from an Individual’s account, not a joint account, so the income exclusion is for the Individual.

QCDs can be made from inherited IRAs. A QCD can come from a Roth IRA, but it would not give you any tax benefit.

There are a few rules to follow. The distribution must be made directly by the trustee of your IRA to the church or other qualifying charitable organization. Not all charities qualify. The maximum that can qualify for a QCD can be more than your RMD, but cannot exceed $100,000 per person. If you contribute to your IRA in the same year you make the distribution, the full amount of the distribution may not be excluded from income. Also, if your IRA includes non-deductible contributions, only a portion of the distribution qualifies for income exclusion.

A QCD is reported, by the custodian, on the annual 1099-R tax statement, like any other IRA withdrawal. The full distribution is reported on your tax return, along with the offsetting exclusion. You can still report the income and take a deduction for a charitable contribution, but using the QCD strategy will probably give you a more generous tax benefit.

Be sure to consult your tax advisor for advice about your specific situation.

Your support of Heritage can be a win all around, for the church and for your pocketbook.

March 23, 2022.

by Rebecca Pace, HUUC Accounts Receivable Treasurer

If you have stock that has been held for more than one year, you can donate the appreciated stock to the church, deduct the fair market value of the stock as a charitable deduction, and pay no tax on the unrealized gain.

Selling the stock yourself and taking a deduction for the cash gift may actually result in higher taxes. First, because of the increased standard deduction, an itemized deduction has lost some value. Also, the taxable gain on the stock will increase your Adjusted Gross Income which will increase your Ohio taxable income. If you are receiving Social Security, the additional income may increase the tax burden on your benefits.

If you are considering doing this, talk to us first. The church has a brokerage account that will allow a quick and painless transfer. If you talk with your financial advisor first, they will probably want to open a new account that will double the paperwork and delay the transfer.

If the stock has a loss, you may want to sell it first, donate the proceeds to the church, for an itemized deduction, and deduct the loss on your tax return.

This is the third in a series. Look up past issues for information on donations from retirement accounts and Donor Advised Funds.

by Rebecca Pace, HUUC Accounts Receivable Treasurer

Since the change in the tax law, increasing the standard deduction, Donor Advised Funds (DAF) have become more popular. Think of them as charitable savings accounts.

Tax-deductible contributions to a DAF allow a taxpayer to bunch their charitable contributions into one year, in order to itemize deductions, while taking the standard deduction in other years. You get the tax deduction when you make the contribution to the fund, but the actual grant to the church or other charity can be made later. This is particularly effective if you have unusually high income one year, with extra cash, but you want to be able to make contributions in later years when your cash flow is back to normal levels.

Donor Advised Funds have been around since 1931. The Greater Cincinnati Foundation sponsors DAFs as well as many brokerage houses. If you are considering this strategy, shop around to find one that fits your needs. Costs and support vary.

Your donation to the DAF is irrevocable. Technically, the donor advises the DAF custodian on when and what organizations should receive grants. There are a few restrictions on what type of organizations can receive grants from a DAF. You can make grants to the church or Heritage Acres or to the Endowment Fund.

Donor advised funds can accept cash, or stock or other property that can be sold. Most DAFs have a limited menu of investment choices you may use until you make the actual grant to the church or other charity.

Watch next month for the tax benefits of donations of appreciated property—and if you didn’t see it, check out last month’s article on donations from retirement accounts.

October 2019.

by Rebecca Pace, HUUC Accounts Receivable Treasurer

You may have noticed a change when you filed your 2018 tax return. The standard deduction increased so that many people no longer itemize their deductions. But, you can still get tax savings from your charitable donations without itemizing.

This month I want to highlight a popular method—Qualified Charitable Distributions (QCD). You must be over 70 ½ to use this strategy.

A person over 70 ½ can direct their retirement IRA Required Minimum Distribution (RMD), or a portion of it, to the church and avoid tax on the distribution. The charitable distribution counts toward your required minimum distribution.

Reducing the taxable income this way will reduce your adjusted gross income, which may reduce the tax burden on your social security benefit, possibly lower your Medicare premiums, and reduce your Ohio state income tax. A lower adjusted gross income may also provide other benefits, depending on your individual situation.

Even if you take more from your retirement account than your RMD, you can still reduce the taxable amount by directing some of it to the church.

In order to take advantage of this strategy you must follow these rules.

1. The check or transfer to the church must come directly from the retirement account. You cannot deposit the retirement money into your personal account and then write a check to the church.
2. An individual can make a QCD for more than their RMD, but they cannot exclude income of more than $100,000 per person. If you want to withdraw more than your RMD, use the first distribution in the year for the QCD.
3. Be sure your tax preparer knows you have made the QCD. You will receive a 1099 showing all of your retirement distributions from the account custodian. The QCD may not be identified on the 1099. It is also very helpful to let the church know that you are using this strategy, so it can be noted on your giving statement.
4. Full disclosure, I’m encouraging donations to the church, but QCDs can be made to most charities.  Gifts to can be made to Heritage Acres and to the Heritage Endowment Fund.
5. You can’t take a tax deduction for the amount given to the church if you don’t pay tax on the distribution, but when you’re using the standard deduction, that’s irrelevant.

There is no tax advantage to taking a QCD from a Roth IRA.

Stay tuned for the next two months, for information on using Donor Advised Funds, and on donating appreciated property.

September 2019.

You can use your Kroger Plus card and Amazon Smile to support Heritage Universalist Unitarian Church. Here’s what to do.

Kroger Community Rewards

Kroger is committed to helping our communities grow and prosper. Every year, Heritage Church earns hundreds of dollars through Kroger Community Rewards.

All you have to do is shop at Kroger and swipe your Plus Card! Go to kroger.com/communityrewards to get started!

Amazon Smile

Amazon donates 0.5% of the price of your eligible AmazonSmile purchases to the charitable organization of your choice. AmazonSmile is the same Amazon you know. Same products, same prices, same service.

Support Heritage Church by starting your shopping at smile.amazon.com. You can also sign up at the AmazonSmile Support Heritage Universalist Unitarian Church page.  Once you have signed up, you can add the Smilematic extension to your web browser, so you’ll never forget to shop at AmazonSmile.

Heritage Church is now giving its Sunday morning collections every Sunday to a worthy outside charity. This has given rise to questions about donations and tax deductions.

If you donate by check, Bob Booth, who records donations coming in, will keep a record of that associated with your name. If you are giving a check as part of your annual pledge payment, write “Pledge” in the memo line. All checks not marked as “Pledge” will go to that week’s charity. All checks should be made out to the church, which can be written simply as “HUUC” on the Pay To line.

What about cash donations?

Bob wants you to know that if people itemize deductions for their income tax return and donate to charities by cash, the donations are deductible if the recipient(s) acknowledge the donation. That means that the cash has to be identified as to who is the donor. You can do this by putting the cash in an envelope and writing your name on the outside, or by paper-clipping a note with your name to the cash.

At the end of each tax year, Bob generates a statement regarding your donations, which you can use if you itemize deductions. If you have questions, contact our Accounts Receivable Treasurer.

February 2017.

Beginning this month, our Board of Trustees has authorized making every Sunday’s plate collection an outreach offering. With the beginning of a new calendar (and tax) year, Heritage Church is proud to join the growing ranks of Unitarian Universalist congregations who have committed themselves to creating a better, more peaceful, more just world by turning an outmoded ecclesiastical practice into a modern tool for effective social change.

In December, your generosity helped us surpass the budgeted amount for offering plate income for our current fiscal year (ending June 30). In future years, we plan to do away with the modest “offering plate” line in our budget, and rely solely on your annual pledges, outside rentals, fundraising, and so on to meet our operating costs.

What this means for us is the ability to give away the offering plate each week. What this means for the world around us is more help and support from the loving hearts and hands of the Heritage Church family for worthy non-profit organizations and projects that are consistent with our Unitarian Universalist principles and values.

Here’s how it will work on Sunday mornings: If you are writing a check to put in the offering plate, make it payable to “HUUC.” It will go toward our outreach offering recipient organization or project for that week, unless you specifically write “Pledge Payment” on the memo line. Doing so would indicate to our Treasurer that you prefer that money be counted as a payment toward your annual pledge. Otherwise, all checks, and all cash contributions, will go toward the outreach offering. (Remember, cash contributions are not considered tax deductible by the IRS.)

January 2017.