IRA Qualified Charitable Distributions (QCDs)
For anybody 70.5 years or older, an Individual Retirement Account (IRA) is a great option for making gifts to the Lord’s work at church, a local WELS-affiliated ministry, and/or a WELS area of ministry.
Typically IRA distributions are taxable, but, for anyone 70.5 or older, qualified distributions from an IRA to charity are free from federal and potentially state income tax. Consider directing IRA distributions to WELS to save on taxes, then using the cash you would have given for other needs. The rollover to charity counts toward satisfying the required minimum distribution. (Those required to make minimum distributions include anyone age 73 as of January 1, 2023 or who had been required to start making minimum distributions in the past.)
You and your spouse, assuming he or she is 70.5 years or older and has an IRA, may each make direct transfers of up to $100,000 per year to charity. Rather than being treated as taxable income, direct transfers to charity are wholly excluded for federal income tax purposes. These transfers do not generate a charitable deduction, but the relief from tax impact is often more advantageous. Consult your tax or financial advisor to determine the most appropriate gift assets for your situation.
You can also make a QCD of up to $50,000 (out of the $100,000 overall annual limit) into a charitable gift annuity in one calendar year. You and your spouse can each distribute up to $50,000 from your IRAs in one year for a CGA (maximum $100,000). A CGA provides you and/or your spouse with fixed quarterly payments for life. Then, after the donor goes to heaven, the remainder of the gift goes to the ministries you choose. Consult your tax or financial advisor to determine how appropriate this option may be for you.
Contact the investment firm that handles your IRA to request a direct transfer of IRA assets to a WELS ministry. The custodian typically provides the appropriate paperwork (or you can download an authorization letter template below). To ensure that your IRA distribution is not taxable, the check must be made payable to the charity, not to you personally.
You can give to multiple WELS ministries by directing your IRA distribution to WELS Foundation. WELS Foundation will distribute funds to the ministries per your instructions and provide you with the proper gift acknowledgment letter.
If interested, talk to your financial planners and your local WELS Christian giving counselor to learn more.
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- March 21, 2023 Last Updated