Outreach in Action

Donations to Outreach can help seniors minimize tax repercussions

by Jo Mayer and Paul Crandall

Thinking of making a donation to Stockbridge Community Outreach? First, thank you, and before you write that check, consider your options. A variety of vehicles exist that can make your contribution both easy and effective. One example is a “QCD” or Qualified Charitable Distribution—a way to take money from an IRA (Individual Retirement Account) or similar retirement account without having it taxed as income, and instead giving it to a charitable organization.

“We’ve used the QCD option to discharge the Required Minimum Distributions from our IRAs for the past several years,” said longtime Outreach board member and donor, Kelly Schmidt. “It is painless and easy to make charitable donations without incurring additional tax liabilities.”

Upon turning 73, all those who have any of the account types listed below must, by law, withdraw a portion annually—this is called a Required Minimum Distribution (RMD)—even if they don’t need or want the funds at that time.

Traditional IRAs
Traditional 401(k)s and other workplace retirement plans, such as 403(b) and 457 accounts
Simplified Employee Pension (SEP) IRAs
Savings Incentive Match Plan for Employees (SIMPLE) IRAs
Profit-sharing plans
Other defined contribution plans

These withdrawals will be subject to state and federal taxes because when the funds were put into the account(s) originally, they were pre-tax dollars.

But if the withdrawal goes directly from an IRA or other account to a qualified charitable organization, no taxes will be levied on the withdrawal—that’s the Qualified Charitable Distribution.

Stockbridge Community Outreach has benefited from this rule and has seen this type of donation grow over the past few years. And you don’t have to wait until you’re 73 years old. QCDs can be made as early as age 70.5, even though RMDs are not required by law at that age; some people choose to do this to reduce their tax burden.

A QCD can provide several potential benefits. It may be a good giving strategy for donors who:

Are required to take a minimum distribution from an IRA, but don’t need the funds and would face increased tax liabilities if they took the distribution as income.
Would like to reduce the balance in an IRA to lower future required minimum distributions.
Would like to make a larger charitable gift than they could if they simply donated cash or other assets.
Have identified which charities they want to support immediately with a substantial gift.
Want reduced Medicare Premiums: Lowering your Adjusted Gross Income (AGI) can help avoid higher Medicare Part B premium surcharges.
Do not wish to make their contribution to a foundation or donor-advised fund.

To make a gift to Outreach (or another qualified organization) using your IRA:

Contact your IRA administrator.
Provide instructions in writing to transfer the amount you wish to donate directly to the qualified 501[c][3] charitable organization of your choice and include the group’s Federal Tax ID Number (Outreach’s is 38-2609279).

Schmidt’s final piece of advice: “Of course, any potential donors should consult with their financial advisor / tax advisor.”

NOTE: To confirm that a charity is a qualified recipient of a QCD, check the IRS site, apps.irs.gov/app/eos/

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