tax rules favor IRA gifts

NOTE:  Checks from your IRA should be made payable to the church or charity and sent directly from your IRA administrator.   

Federal legislation authorizes direct distributions to charity from traditional IRAs for eligible persons.  Persons over age 70 ½ may make gifts to charity directly from individual retirement accounts (IRAs) without including the distribution as personal income.  The gift also counts as part of a donor’s required minimum distribution (RMD) if the RMD rules apply to the donor.  (Note: The mandatory starting age for RMDs was recently increased. The change does not apply to folks who are already taking the RMD under prior rules.) As described below, an IRA charitable gift distribution must comply with certain rules to be a “qualified charitable distribution” (QCD)…

requirements

  • You must be at least age 70 ½ when the charitable distribution is made.  (Note: This remains the eligibility age for a charitable distribution, even though the RMD age has increased.  Confusing!) 
  • The law applies only to traditional IRA accounts. Other plans such as 401(k) or 403(b) plans do not qualify unless those assets are first transferred into an IRA account.
  • The QCD(s) must be made directly from your IRA administrator to your church, UM organization or other favorite charity.  (If you have check writing privileges on your IRA account, that should be treated as a QCD — but note the timing issue described elsewhere on this page.) 

key points


  • Total QCDs are limited to $100,000 per taxpayer per year. If married and each spouse has an IRA, then each may gift up to $100,000 per year.  (This will be indexed for inflation starting in 2024.)
  • The gift counts toward your IRA annual required minimum distribution (RMD) – if applicable.  (Your gift amount may exceed the RMD amount, but will not be counted as income to you so long as it does not exceed the annual limit of $100,000 and is not deemed basis in the account.)
  • The gift distribution is excluded from your income for both federal and Missouri state income tax purposes. Therefore, you cannot deduct the gift on your income tax return — and no need to itemize!
  • Your QCD may not be used to contribute to a private foundation, donor advised fund, or supporting organization.
  • NEW — starting in 2023, eligible persons may make a one-time QCD of up to $50,000 to fund a charitable gift annuity or a charitable remainder trust. The amount will be indexed for inflation. This option can only be used once. Contact the Foundation for further details.
  • Be sure to request a proper gift receipt from your church or charity. (See below for a sample church IRA gift receipt letter.)

avoid the year-end IRA gift trap!

Many large IRA administrators now offer IRA owners the option to write checks out of their IRA account. This means that when an eligible IRA owner wants to make a QCD gift to their church, they can just write a check from that account and mail it. It sounds simple.  What could possibly go wrong?

Donors are used to writing gift checks from a regular checking account near the end of the year and mailing them. So long as they are postmarked by December 31, the gift is a deductible charitable gift when mailed.  This does not apply to IRA gifts that the donor wants to count as Qualified Charitable Distributions in the current year!  The QCD rules require action by the IRA administrator, which means the date of gift is established when the IRA administrator transfers funds after the church deposits the check. If a donor mails an IRA check to their church in late December and the church does not cash it until early January, two things occur:     

  • The donor will not get credit for the distribution in the year they mailed it. The distribution will be a QCD in the new tax year. 
  • If the donor was counting on the distribution to meet their required minimum distribution in the current year, then they will have to pay a 50% penalty on the amount that was not distributed. That will be one unhappy donor!
  • Churches: Remind your donors to make their charitable IRA rollover gifts several weeks before the end of the year.
  • Churches and Donors: Alert the church office to deposit all checks promptly! This should be standard practice for the church, and donors can contact the church office to give them an extra heads-up that an IRA gift is coming.

helpful information & resources

The preceding outline is provided for informational purposes only and is not intended as financial, tax or legal advice.  Individuals will want to discuss this with their own professional advisers and IRA administrators.  (Donors and church administrators may contact the Foundation for assistance and information at 800-332-8238 and/or download sample materials below)

Sample Letter from Pastor/Church Leadership to Donors

To view information about Qualified Charitable Distributions from an IRA as posted on the IRS website, please follow this link:  Publication 590-B (2019)


get a brochure

This brochure summarizes the information on this page and can be ordered in bulk for use in your congregation on our Brochure Order page.

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