Support Your Church & Save on Taxes

OUMC member Ron Ziebel, a pension actuary of long experience, suggests that members over the age of 70.5 consider this way to benefit the church…

(click to enlarge)

“Attached is a spreadsheet that illustrates the income tax reduction that may be possible if a Qualified Charitable Distribution (QCD) is used to make contributions to a church or other charity. A QCD is a direct transfer from an IRA trustee to the charity bypassing the eligible IRA owner. To be eligible the IRA owner must have attained age 70.5 years. Funds transferred by QCD are excluded from both taxable income and allowable deductions from income.

Due to the exclusion from both income and deductions it appears as if there is no advantage to a QCD. However a QCD alters the calculation of taxable Social Security benefits and also medical expense deductions, if itemized.

IRS Form 1040 instructions for Lines 15a and 15b IRA Distributions require reporting of total distributions on line 15a and distributions excluding QCDs on line 15b. The calculation of taxable Social Security benefits entered on line 20b utilize the smaller IRA amount listed on line 15b. Using the smaller 15b IRA amount in the calculations of total other income reduces such total. The reduced total of other income reduces the amount of taxable Social Security benefits.

In a similar manner the reduced total income results in a lower 10% threshold used in the calculation of allowable medical expense deductions.

I suspect that QCDs are under utilized. For the benefit of all eligible members of a sharing and caring congregation I recommend that this information be shared with all members who have attained age 70.5 years.”

Ron suggests that you contact your financial advisor to see if this charitable giving technique would benefit you.