How churches should handle a donation from a member’s retirement account
January 17, 2020 / By The Rev. Susan Ranous, Conference Council of Finance & Administration
As many of you may know, the Internal Revenue Code allows a person who is at least 70½ years old to donate to a charitable organization (including churches) directly from their retirement account. It is known as a qualified charitable distribution (QCD).
If a member of your church authorizes their IRA or retirement custodian to make a direct contribution to the church from their retirement account, how do you handle it?
- You should NOT issue a tax-deducible receipt to the member since the distribution is not treated as taxable.
- You SHOULD give an acknowledgement letter to the retirement custodian as well as the donor. This letter is not like your normal contribution receipts. It would simply state the date received, what was received, i.e. a qualified charitable distribution of $25,000, and the name of the donor (the holder of the retirement account).
Your normal contribution receipts must be issued for donations of $250 or more. They should include the church’s name and address, the amounts of the cash contributions and the dates received. A statement that “no goods or services were provided by the organization in return for the contribution, other than intangible religious benefits needs to be provided.
If the church receives a non-cash contribution, then a letter must be issued to the donor, again giving the church’s name and address, the date of the contribution received, and what was donated, i.e. 250 shares of IBM stock. You do NOT give a value of the stock. If something was given to the church and then sold at an auction or otherwise, then the letter would include the amount that the item was sold for.
- IRA owners over 70 ½ can make QCDs from their IRAs that will be considered part of their required minimum distribution
- The distribution MUST go directly from the custodian to the charity. It cannot go to the owner and then the charity
- The maximum yearly amount is $100,000. Married couples filing jointly can each make a QCD up to the $100,000 from their IRA.
- The custodian will issue a 1099-R at the end of the year, including all distributed amounts, but the charitable distribution amount will be excluded from the taxable box.
- The amount should NOT be included in the church’s donation system as a tax-deductible gift and a tax-deductible receipt cannot be issued.