Are you in your 70s and receiving distributions from your individual retirement account (IRA)? Did you know you can potentially make a qualified charitable distributions (QCD) to Providence Network and lower your tax burden for the year? While nothing in this article provides financial or tax advice (please speak to your financial, legal, or tax advisor), we hope to introduce you to this giving opportunity.

What is a Required Minimum Distribution (RMD)?

The Internal Revenue Service (IRS) defines a required minimum distribution this way:

Required minimum distributions (RMDs) are the minimum amounts you must withdraw from your retirement accounts each year. You generally must start taking withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts when you reach age 72 (73 if you reach age 72 after Dec. 31, 2022).

What effect does a Required Minimum Distribution (RMD) have on my taxes? 

Thrivent Financial lists the type of accounts that require RMDs and explains how a required minimum distribution can result in higher taxable income. They write: 

Once you withdraw your annual RMD, the money is taxed at your current income rate. The federal income tax impact is similar to the income you earn from working at a job—the higher your income for the year, the higher your tax rate. However, you might have some control over the timing and amount of your withdrawals.

When you reach a certain age, you are required by the IRS to take a distribution from your retirement account. Unfortunately, this distribution may not be needed, and may give you a higher taxable income than desired. Thankfully, a charitable gift to Providence Network may be able to lower your tax burden.

How might a Qualified Charitable Distribution (QCD) lower my taxes?

The IRS defined qualified charitable distributions as, “A QCD is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax-deductible contributions” At the end of 2023, the IRS published this statement regarding QCDs:

The Internal Revenue Service today reminded individual retirement arrangement (IRA) owners age 70½ or over that they can transfer up to $100,000 to charity tax-free each year.

These transfers, known as qualified charitable distributions or QCDs, offer eligible older Americans a great way to easily give to charity before the end of the year. And, for those who are at least 73 years old, QCDs count toward the IRA owner’s required minimum distribution (RMD) for the year.

Thrivent explains it this way, “If you give money to charity, QCDs offer a unique way to reduce taxes associated with RMDs. Money donated through a QCD counts toward your RMDs and may reduce your taxes since you can exclude the distribution from your tax return.” Thus, a qualified charitable distribution (QCD) from your IRA made directly to an eligible charity like Providence Network, may count towards your required minimum distribution (RMD) for the year.

What are some other benefits of giving a Qualified Charitable Distribution (QCD)?

Beyond lowering your adjusted gross income (AGI) for tax purposes, a QCD gives a taxpayer the full benefit of a charitable contribution deduction without having to itemize deductions. Many taxpayers do not itemize deductions anymore. The QCD may allow them to continue doing so while also gaining the tax benefits of a charitable contribution.

Your potential qualified charitable distribution (QCD) may also impact your Medicare premiums, as Medicare premiums are income-based. This is not applicable to everyone and should be discussed with your financial or tax advisor.

How do I give a Qualified Charitable Distribution (QCD) from my IRA?

The Internal Revenue Service (IRS) gives some specific rules for how to correctly give a distribution from your IRA to charitable organizations.

Any IRA owner who wishes to make a QCD for [the tax year] should contact their IRA trustee soon so the trustee will have time to complete the transaction before the end of the year.

Normally, distributions from a traditional IRA are taxable when received. With a QCD, however, these distributions become tax-free as long as they’re paid directly from the IRA to an eligible charitable organization.

QCDs must be made directly by the trustee of the IRA to the charity. An IRA distribution, such as an electronic payment made directly to the IRA owner, does not count as a QCD. Likewise, a check made payable to the IRA owner is not a QCD. (emphasis added)

A key point is that a QCD must go directly from the retirement account to the charity and not pass through the personal accounts of a donor.

Are there any other options to consider?

There are several more qualified charitable distribution options available, some that may generate both income for the donor and revenue for the charity (aka. split interest payment). Thrivent explains: 

Something else to note is that a one-time QCD of $50,000 is allowed through some charitable remainder annuity trusts (CRATs), charitable remainder unitrusts (CRUTs) or charitable gift annuities (CGAs). This change expands the types of charities that can receive a QCD, presenting another opportunity to provide a meaningful gift while potentially reducing your tax burden.

You can read more about charitable gift annuities (CGAs) and Charitable Remainder Trusts (CRTs) here. Likewise, the National Christian Foundation (NCF) provides resources for CGAs and CRTs as well.

How do I give a Qualified Charitable Distribution (QCD) to Providence Network?

Please consider the following steps for giving a QCD directly to Providence Network:

1. Have any questions we can answer? Please contact us.

If you have any questions we can help with, please reach out. Our Development phone number is (303) 551-9319 and our email is development@providencenetwork.org

2. Notify your retirement account manager/financial institution.

To give a qualified charitable distribution from your IRA, please provide the following information to your IRA manager/financial institution:

Legal Name: Providence Network

Taxpayer ID (EIN): 74-2505406

Primary Address: 357 N. Broadway, Denver, CO 80203

You may also need to provide in writing the gift amount, your account information, and your intention to give a qualified charitable distribution. We have created a Qualified Charitable Distribution (QCD) Form to help initiate this process. 

Once your gift is received, we will send you an IRA receipt for your year-end tax filing. Please make sure to include the correct mailing address for the receipt.

Thank you for considering giving a Qualified Charitable Distribution (QCD) from your IRA to Providence Network.

We are grateful for you considering giving to Providence Network from your IRA or other retirement account. We hope you experience tax benefits but also want to affirm how your giving is enabling lasting change. All donations empower men, women, and children in our homes to leave addiction, domestic violence, and homelessness to become self-sufficient, healthy, flourishing members of our community. Thank you.

Disclaimer: Providence Network has not provided you with any investment, financial, legal, or tax advice. Instead, we have advised you to consult with your own legal and financial advisors and tax experts. We are not responsible for any decisions or actions taken in reliance upon or as a result of the content made available on this website or social media channels.

Acknowledgements: Providence Network is not sponsored by or an affiliate of Thrivent Financial or the National Christian Foundation (NCF). We appreciate and acknowledge the helpful resources they have created.