The problem with most retirement plans is that eventually, you have to pay taxes on your distributions … or do you? Would you believe there’s a way you can avoid paying those taxes and greatly increase your giving to God’s kingdom at the same time?  

• The Bible is clear that Christians should pay their taxes. Romans 13:1-2 reads, “Let every person be subject to the governing authorities. For there is no authority except from God, and those that exist have been instituted by God.”
• At the same time, we don’t want to pay more in taxes than we have to, because that wouldn’t be good stewardship. Fortunately, there’s a way you can legally (at least for now) avoid paying some taxes and practice amazing stewardship at the same time.
• Of course, we’re talking about the qualified charitable Distribution in the U.S. tax code. I’ve mentioned it several times before, but today I want to really dive into what it is and how it works.
• WHAT IS A QUALIFIED CHARITABLE DISTRIBUTION? 
• A qualified charitable distribution or QCD is a withdrawal of funds from your traditional IRA that goes directly to a qualified charity, such as your church or a ministry you’d like to support.
• To make a QCD, you have to be at least age 70 ½. This money is not subject to taxes and won’t be counted as taxable income. And here’s a really great provision with the QCD— if you meet all the requirements, it will count as your Required Minimum Distribution or “RMD.”
• That’s important because now beginning at age 73, you must take RMDs on most qualified retirement plans, including a traditional IRA. But you can get around that rule by making a qualified charitable distribution instead.
• We mentioned that you can make a QCD from your traditional IRA, but what about other retirement plans? You can also make a QCD from your SEP IRA if you have one, or a so-called SIMPLE IRA. You can even do it from a Roth, but because no taxes are due on Roth distributions, there’s no advantage to it.
• You cannot, however, make a QCD from a 401k or 403b retirement account. You would first have to roll the funds over to an IRA and make the QCD from there.
• Also, not every charity is eligible for a qualified charitable distribution. It must be a 501(c)(3) organization and private foundations are ineligible for QCDs. It’s a good idea to check with a tax professional to make sure your favorite charity can receive the gift.
• HERE’S HOW A QCD CAN REDUCE YOUR FEDERAL TAXES: 
• First, even though it’s a withdrawal from your IRA, it won’t be counted as taxable income, as it would if you simply withdrew those funds from your account.
• Second, you don’t have to itemize deductions on your return to make a QCD. That means if the standard deduction of $13,850 for a single filer, or $27,700 for married joint filers is higher, you can still take it, further reducing your federal taxes.
• And third, because a qualified charitable distribution can be made instead of a required minimum distribution, it won’t increase your federal taxable income. That’s potentially huge because often an RMD will push some of your income into a higher tax bracket. You won’t have to worry about that if you make a QCD instead.
• Of course, it’s not all lollipops and rainbows. There are a few downsides to QCDs. First, as we said, the money must go to a qualified charity. You also can’t make the donation directly. It must go through your retirement plan trustee to the charity.
• Also, you can’t claim a QCD as an itemized charitable donation and there’s an annual limit of $100,000— not a problem for most people.
• To sum up, the QCD is a powerful tool that enables you to lower your taxes by reducing your taxable income and it can satisfy your required minimum distribution, which can keep some of your income from being taxed at a higher rate.
• If you have a required minimum distribution coming up this year, I hope you’ll take advantage of the QCD to increase your giving back to God’s Kingdom.
• The QCD is more than just a great way to lower your tax burden. For Christians, it gives us a chance to be more faithful stewards of the resources God entrusts to us. It’s an opportunity to be more generous that you shouldn’t pass up— if you’re able to use it.
• 2 Corinthians 9 puts it like this: “Whoever sows sparingly will also reap sparingly, and whoever sows bountifully will also reap bountifully. And God is able to make all grace abound to you, so that having all sufficiency in all things at all times, you may abound in every good work. As it is written, ‘He has distributed freely, he has given to the poor; his righteousness endures forever.’”

On this program, Rob also answers listener questions: 

• Is using a credit card better than a debit card when traveling overseas? 
• How is severance income taxed? 
• When does a regular IRA make sense? 
• Is it wise to move a pension into an IRA? 

RESOURCES MENTIONED:

• App.FaithFi.co……(read more)

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Qualified Charitable Distributions (QCDs) are a powerful way for individuals aged 70½ and older to support their favorite charities while also reducing their tax burden. This unique charitable giving strategy allows older Americans to donate funds directly from their Individual Retirement Accounts (IRAs) to qualified nonprofits, without having to count the distributions as taxable income.

QCDs were first introduced by the Internal Revenue Service (IRS) in 2006 as part of the Pension Protection Act. Since then, they have become an increasingly popular method for seniors to support charitable causes while maximizing the tax benefits of their retirement savings.

One of the key benefits of QCDs is that they can help retirees meet their required minimum distributions (RMDs) while also supporting the causes and organizations they care about. When individuals reach the age of 70½, they are required to start taking distributions from their traditional IRAs, and these distributions are typically subject to income tax. However, by making a QCD, individuals can donate up to $100,000 annually from their IRAs to qualified charities without having to report the distribution as taxable income.

In addition to reducing taxable income, QCDs also count towards the RMD requirement, making them a tax-efficient way for seniors to meet their retirement account obligations while also giving back to their communities. This can be particularly beneficial for retirees who do not need the full amount of their RMDs for living expenses and want to avoid the tax implications of taking more money than necessary from their IRAs.

It’s important to note that there are specific rules and requirements for making a QCD. The distribution must be made directly from the IRA to the charity, and the donor must be at least 70½ years old at the time of the donation. Additionally, the QCD cannot exceed $100,000 per year, and it must be made to a qualified 501(c)(3) organization.

For individuals who are interested in making a QCD, it’s advisable to consult with a financial advisor or tax professional to ensure that all of the requirements are met and to fully understand the implications for their individual financial situation. Additionally, it’s important for donors to keep accurate records of their QCDs, as the IRS requires documentation to support the tax-free treatment of these distributions.

Overall, Qualified Charitable Distributions can be a valuable tool for retirees who want to support charitable causes while also maximizing the tax benefits of their retirement savings. By leveraging QCDs, seniors can make a meaningful impact on the organizations and causes they care about while also reducing their taxable income and meeting their RMD requirements. This win-win strategy allows older Americans to leave a lasting legacy and support the greater good, all while maximizing their retirement accounts for their own financial well-being.