Monthly Archives: March 2016
Samuel Rivera, Financial Associate with Thrivent Financial, has provided this information regarding Charitable Contributions from IRAs. If you need help making your charitable contribution, please contact him at (239) 405-6886, or firstname.lastname@example.org
Charitable Contributions from IRAs
The Pension Protection Act of 2006 first allowed taxpayers age 70½ or older to make tax-free charitable donations directly from their IRAs. Technically, these taxpayers were allowed to exclude from gross income otherwise taxable distributions from their IRA (“qualified charitable distributions,” or QCDs), up to $100,000, that were paid directly to a qualified charity. These gifts are also known as “Charitable IRA rollovers.” The law was originally scheduled to expire in 2007, but was extended periodically through 2014 by subsequent legislation, and finally made permanent by the Protect Americans from Tax Hikes (PATH) Act of 2015.
How QCDs work for 2016
You must be 70½ or older in order to make QCDs. You direct your IRA trustee to make a distribution directly from your IRA (other than SEP and SIMPLE IRAs) to a qualified charity. The distribution must be one that would otherwise be taxable to you. You can exclude up to $100,000 of QCDs from your gross income in 2016. If you file a joint return, your spouse can exclude an additional $100,000 of QCDs in 2016. Note: You don’t get to deduct QCDs as a charitable contribution on your federal income tax return–that would be double-dipping.
QCDs count toward satisfying any required minimum distributions (RMDs) that you would otherwise have to receive from your IRA, just as if you had received an actual distribution from the plan. However, distributions that you actually receive from your IRA (including RMDs) that you subsequently transfer to a charity cannot qualify as QCDs.
Example(s): Assume that your RMD for 2016, which you’re required to take no later than December 31, 2016, is $25,000. You receive a $5,000 cash distribution from your IRA in February 2016, which you then contribute to Charity A. In June 2016, you also make a $15,000 QCD to Charity A. You must include the $5,000 cash distribution in your 2016 gross income (but you may be entitled to a charitable deduction if you itemize your deductions). You exclude the $15,000 of QCDs from your 2016 gross income. Your $5,000 cash distribution plus your $15,000 QCD satisfy $20,000 of your $25,000 RMD for 2016. You’ll need to withdraw another $5,000 no later than December 31, 2016, to avoid a penalty.
Example(s): Example: Assume you turned 70½ in 2015. You must take your first RMD (for 2015) no later than April 1, 2016. You must take your second RMD (for 2016) no later than December 31, 2016. Assume each RMD is $25,000. You don’t take any cash distributions from your IRA in 2015 or 2016. On March 31, 2016, you make a $25,000 QCD to Charity B. Because the QCD is made prior to April 1, it satisfies your $25,000 RMD for 2015. On December 31, 2016, you make a $75,000 QCD to Charity C. Because the QCD is made by December 31, it satisfies your $25,000 RMD for 2016. You can exclude the $100,000 of QCDs from your 2016 gross income.
As indicated above, a QCD must be an otherwise taxable distribution from your IRA. If you’ve made nondeductible contributions, then normally each distribution carries with it a pro-rata amount of taxable and nontaxable dollars. However, a special rule applies to QCDs–the pro-rata rule is ignored and your taxable dollars are treated as distributed first. (If you have multiple IRAs, they are aggregated when calculating the taxable and nontaxable portion of a distribution from any one IRA. RMDs are calculated separately for each IRA you own, but may be taken from any of your IRAs.)
Caution: The gift cannot be made to a private foundation, donor-advised fund, or supporting organization (as described in IRC Section 509(a)(3)). The gift cannot be made in exchange for a charitable gift annuity or to a charitable remainder trust.
Why are QCDs important?
Without this special rule, taking a distribution from your IRA and donating the proceeds to a charity would be a bit more cumbersome, and possibly more expensive. You would need to request a distribution from the IRA, and then make the contribution to the charity. You’d receive a corresponding income tax deduction for the charitable contribution. But the additional tax from the distribution may be more than the charitable deduction, due to the limits that apply to charitable contributions under Internal Revenue Code Section 170. QCDs avoid all this, by providing an exclusion from income for the amount paid directly from your IRA to the charity–you don’t report the IRA distribution in your gross income, and you don’t take a deduction for the QCD. The exclusion from gross income for QCDs also provides a tax-effective way for taxpayers who don’t itemize deductions to make charitable contributions.
The information provided in these materials, developed by an independent third party, is for informational purposes only and has been obtained from sources considered to be reliable. However, Thrivent Financial does not guarantee that the foregoing material is accurate or complete. The material is general in nature and does not purport to be a complete description of the products, securities, concepts, services, markets, or developments referred to in this material. This information is not intended as a solicitation or an offer to buy or sell any product or service referred to herein. The information does not take into consideration your personal financial or account information. Products mentioned may not be suitable for all individuals. Past performance may not be indicative of future results. Thrivent Financial and its respective associates and employees cannot provide legal, accounting, or tax advice or services. Work with your Thrivent Financial representative, and as appropriate, your attorney and/or tax professional for additional information. Insurance products issued or offered by Thrivent Financial, the marketing name for Thrivent Financial for Lutherans, Appleton, WI. Not all products are available in all states. Securities and investment advisory services are offered through Thrivent Investment Management Inc., 625 Fourth Ave. S., Minneapolis, MN 55415, a FINRA and SIPC member and a wholly owned subsidiary of Thrivent Financial, the marketing name for Thrivent Financial for Lutherans, Appleton, WI. Thrivent Financial representatives are registered representatives of Thrivent Investment Management Inc.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.
By Rev. Robert Selle
On Sunday March 6 our Immokalee Lutheran Church was pleased to receive Virginia Herrera and six of her children into the Christian faith through the washing away of their sins by baptism into the name of Jesus.
This was a big step for her and her children, one that they did not enter into lightly. Virginia and her family have participated in our Immokalee worship community for several years. We studied Scriptures and talked often about baptism and what it means to be a child of God. Pray for Virginia and her children as they embark on a new walk with Jesus as the focus of their family.
(Pictured from left to right)
Christiina Leddin (Immigration Specialist), Lindsay Ray (Immigration Attorney), Rev. Robert Selle (Pastor/CEO), Anastacia Hernandez (Immokalee Housekeeping), Nancy Ramirez (Immokalee Receptionist), Vicar Karl Glander (Immokalee Service Director), Rev. Andre Mezilus (Pastor Bethlehem Haitian Church), Rev. Saint Luc Charelus (Pastor Bethlehem Haitian Church) and Donna Selle (Bookkeeper). Not pictured are Eileen Ortegon and Maria Isabel Diaz.