Will a Qualified Charitable Distribution to AUMC or the AUMC Foundation Lower Your Tax Bill?
This year brings new opportunity for many retirees when planning charitable contributions. The Tax Cuts & Jobs Act nearly doubled the “standard deduction” (For 2018-$26,600 for a married couple and $13,600 for a single person over age 65) and the vast majority of taxpayers will no longer benefit from itemized deductions. However, there is a strategy that still provides a tax benefit called a Qualified Charitable Distribution (QCD). People who take Required Minimum Distributions (RMDs) from an IRA can get a tax break without itemizing deductions by using a QCD.
How Does a Qualified Charitable Distribution Work?
A QCD is a direct payment of RMDs from an IRA to a qualified charitable organization such as AUMC or the AUMC Foundation. This strategy is available to retirees age 70 1/2 and older who have a traditional IRA account, a SEP IRA or a Simple IRA. Amounts processed as a QCD count toward the RMD requirement and reduces the taxable amount of your IRA distribution. This lowers your taxable income resulting in a tax savings! The funds must be transferred directly from your IRA to the AUMC or AUMC Foundation. When you request your RMD each year, tell the IRA custodian that you want to take advantage of the QCD before processing the RMD. This strategy works well to fund your annual pledge or make a special gift to the AUMC Foundation.
Who Should Consider a QCD?
Those who donate to the church and do not need RMDs to sustain their lifestyle will benefit the most. A QCD really pays off for anyone in this situation.
Assumptions: Married Couple, age 73 with income of $114,000 and itemized deductions of $21,600 who are considering a $10,000 donation.
Take Standard Deduction: $26,600
Adjusted Gross Income: $87,401
Tax Due: $11,107
Tax Savings: None
$10,000 Gift from Bank Account:
Take Itemized Deduction: $31,600
Adjusted Gross Income: $82,401
Tax Due: $10,007
Tax Savings: $1,100
Use QCD- $10,000 gift to church from IRA Required Minimum Distribution:
Take Standard Deduction: $26,600
Adjusted Gross Income: $77,401
Tax Due: $8,907
Tax Savings: $2,200
*This information is not a substitute for individualized tax advice. Please contact your tax advisor.
Frequently asked questions
WHAT IS THE ARBORLAWN FOUNDATION?
The Arborlawn United Methodist Church Foundation holds permanent endowment funds and other designated gifts separate from the church operating budget. These funds advance the work of the church by growing and providing a permanent source of financial support. The Foundation is overseen by church members appointed by the Charge Conference of the church.
The Primary Foundation Fund is dedicated to maintain, improve, and expand the church’s property including repayment of debt, if needed. Only the fund income may be spent each year, leaving the fund balance intact to generate income year after year.
Contributions will be added to the Primary Fund unless the donor otherwise directs. Any number of funds may be established by the Foundation for designated or specific purposes. Honoraria and Memorials are especially appreciated as lasting tributes to friends and loved ones.
HOW WILL MY GIFT BE USED?
Gifts to the Arborlawn Foundation can be used in various ways. One option is to make an undesignated gift. These gifts are added to the Primary Fund and used to finance non-budgeted improvements and repairs such as carpeting, plumbing, air conditioning repairs, parking lot resurfacing, roofing, kitchen repairs, sound system work, or other improvements to church property.
WHAT CAN I GIVE?
The Foundation can accept gifts of all types and sizes. Testamentary gifts provide a way to continue your tithe to the church in perpetuity. Examples of gifts opportunities include: cash, real estate, personal residences, stocks, bonds, life insurance, will bequests, or gifts through charitable trusts.
You may want your gift to support or create a certain ministry, provide specific equipment, or pay for special church projects. Your choices are as varied as your interest. The Foundation will administer your gift in strict accordance with your wishes. Gifts of all varieties and sizes are welcomed.
Foundation gifts can be left in the church office. Checks should be made payable to Arborlawn United Methodist Church Foundation, Inc.
Rev. Chris Mesa, Senior Pastor