Charitable Distributions from IRAs

By George Faulkner and Lori Hoppmann

For those of you fortunate enough to be over age 70 & 1/2 and have individual retirement accounts (IRAs), here’s a suggestion on how to make a capital campaign or annual operating pledge contribution that’s fully tax-deductible. With the recent federal income tax changes effective in 2018, it’s much harder to take advantage of itemizing your deductions, including for charitable donations. But the law now allows for qualified charitable distributions (QCDs), where you can assign part or all of your IRA’s annual required minimum distribution to a charity and avoiding federal income taxes on that part of the distribution.

For example, assume you need to take a $10,000 IRA distribution in 2019 and your marginal federal income tax bracket is 22%. If you take it all as regular income and just take the standard deduction, you pay an additional $2,200 in taxes, regardless of your donation to UUCWC. But, let’s say you have a $2,000 regular annual pledge and a $1,000 capital campaign pledge to pay during 2019. If you direct the total $3,000 of your $10,000 IRA distribution as a QCD to the church, then you’ll save $660 on your taxes for 2019. Note: you have to direct your IRA account administrator to send the donation directly to the church, not to you. Or if they allow check writing on your IRA, they will cut the check for you to give to the church. Also, the advantage of using a QCD applies to donations you want to make to any qualified charity, not just to UUCWC.

Please contact Lori Hoppmann or George Faulkner with any questions. And if you are going to use this option for a donation to UUCWC, please email so that we can keep an eye out for it and make sure to allocate it correctly.