SENIORS 70.5 YEARS OF AGE AND OLDER

Qualified Charitable Distributions - A GREAT way to support St. Katherine and reduce taxes

 Many older parishioners hold tax-deferred Individual Retirement Accounts or IRA’s, which probably began as 401K accounts while still working.  The accounts were funded with earnings PRE-TAX (the money was removed from your paycheck BEFORE taxes were deducted).  When you retire, these funds are used as a source of income for your expenses.  Since they were not taxed when deposited into the 401K/IRA, these funds are FULLY TAXABLE as ordinary income when they are withdrawn in your retirement.  Withdrawals can be made without penalty any time after age 59½. At age 72 (73 if you turned 72 after December 31, 2022), you are REQUIRED to withdraw a “Required Minimum Distribution” or RMD each year in an amount based on your age and the balance in your IRA at the end of the preceding year.  You will be required to pay tax on this withdrawal as if it were ordinary earned income.

In 2006, a provision of the Pension Protection Act of 2006 (P.L. 109-280) established the “Qualified Charitable Distribution” or QCD. Eligibility for making QCDs from a taxable IRA begins at age 70½ .  A QCD is a VOLUNTARY withdrawal from your IRA, which in 2024 can be up to $105,000 (individual older than 70½) or $210,000 (married, both donors older than 70½), which is paid DIRECTLY by the financial institution where your IRA resides to a qualified charity or tax-exempt organization like St. Katherine. The donor pays NO TAX on the QCD and, as a tax-exempt entity, the charity or church also pays no tax.  Note, however, when you file your tax return for the year in which you made the QCD, you cannot deduct the QCD amount on Schedule A, as the QCD was not made with previously-taxed money.  QCD’s are nevertheless a “win-win”, in that you can donate to the church or other qualified entity, pay no tax, and have the recipient benefit in the full amount of your QCD.  Any amount donated as a QCD in a given year reduces the required RMD amount for that year, up to and including your entire RMD amount (subject to the 2024 $105000 limit, which rises to $108000 in 2025).

As always, please consult a tax professional to ensure that all the above conforms to your personal situation and circumstances before making any withdrawals or donations. St. Katherine GOC does not warrant the information on this page to be correct, and tax laws change frequently.