Author: Vince Daniele, RXCSF Donor (Pittsford, NY)
Attention skiers, parents of skiers, and grandparents of skiers. Are you aware that RXCSF can accept charitable contributions that are in addition to the “Supporter Levels” listed on the website? It’s true. You can support the organization by making charitable contributions in several ways, including donating online, or printing the donation form found on the website and mailing the form and a check to RXCSF. However, if you are 70 1/2 years of age, or older, what may be better than writing a check or donating online is using money from your IRA to make a Qualified Charitable Distribution (QCD) to RXCSF, which, in addition to helping the organization, can help you reduce your taxes and your Adjusted Gross Income (AGI). QCDs don’t require that you itemize your income tax deductions, which due to the current tax laws, means you may decide to take advantage of the higher standard deduction, but still use a QCD for charitable giving.
A QCD is a direct transfer of funds from your IRA, payable to a qualified 501(c)(3) organization, like RXCSF. QCDs can be counted toward satisfying your required minimum distributions (RMDs) for the year, but they need not be used for that purpose. They can be above and beyond whatever money you withdraw for personal purposes. Any amount donated above your RMD does not count toward satisfying a future year’s RMD.
QCDs are excluded from your taxable income. This is not the case with a regular withdrawal from an IRA, even if you use the money to make a charitable contribution later on. Funds distributed directly to you, the IRA owner, and which you then give to charity do not qualify as a QCD. If you take a withdrawal, the funds would be counted as taxable income even if you later offset that income with a charitable contribution deduction. Why is this distinction important? If you take an IRA withdrawal as income, instead of as a QCD, your distribution will count in your Adjusted Gross Income. This additional AGI may push you into a higher tax bracket and may also reduce your eligibility for certain tax credits and deductions. For example, your taxable income helps determine the amount of your Social Security benefits that are subject to taxes. Keeping your taxable income level lower may also help reduce your potential exposure to the Medicare surtax.
Many IRAs are eligible for QCDs—Traditional, Rollover, Inherited, SEP (inactive plans only), and SIMPLE (inactive plans only). Under certain circumstances, a QCD may be made from a Roth IRA, but distributions from a Roth IRA are already generally tax-free, so consult a tax advisor to determine if making a QCD from a Roth is appropriate for your situation. QCDs can be made only from IRAs, not 401(k)s, 403(b)s or similar types of retirement accounts.
The maximum annual amount that can qualify for a QCD is $100,000, probably not a concern for most of us. Contributing to an IRA may result in a reduction of the QCD amount you can claim. The aggregate amount of deductible IRA contributions you make to your IRA after you turn 70 1/2 will reduce the amount of the QCD that is not includible in your gross income.
To report a Qualified Charitable Distribution on your Form 1040 tax return, you generally report the full amount of the charitable distribution and other IRA distributions on the line for IRA distributions. On the line for the taxable amount, enter the difference between the total distribution and the QDC, or enter zero if the full amount was a qualified charitable distribution. Enter “QCD” next to this line.
In my own case, my IRA administrator requires that QCDs be a minimum of $1,000. As was explained to me, they are disinclined to be writing $50 checks to the local volunteer fire department. Check with your own financial institution for their policy.
RXCSF does not have a history of receiving a large number of significant charitable contributions. That *CAN*, and should start to change. We here in the greater Rochester area are fortunate to enjoy the benefits and services provided by our fine organization. The fruits of the work provided by our officers and active members should be recognized. Think about this. The cost of a new snowmobile and other grooming equipment can easily run from $10,000 to $12,000, or more. I believe many readers of this article are capable of providing funding to cover a significant portion of, if not the complete cost of some of this crucial grooming equipment.
I understand that many people truly need the money that’s coming out of their IRA accounts, but if you are lucky enough that you don’t need all of it, one of the nice things that you can do is use your IRA to distribute money directly to charitable causes. As you think about your 2022 charitable giving, please consider gifting to RXCSF. And please consult your tax advisor to ask about QCDs, and using the QCD mechanism with RXCSF. In my own opinion, contacting the organization before making such a gift will alert officers to be on the lookout for a check from your financial institution or brokerage, since the check will not be coming directly from you, unless you have asked that the check be made to Rochester Cross County Ski Foundation, mailed to you, then sent to RXCSF by you, which is a viable strategy.
Thank you for considering this request.