There are many ways to pay your pledge
- Send a check to the church office
- Transfer stocks or bonds from your broker (avoids capital gains tax)
- Automatic “Bill-Pay” service (arrange with your bank)
- Pay by credit card (fee charged to church, you have the option to cover it)
If you are over the age 70 ½ and you have an IRA – Individual Retirement Account - Up to $100,000 a year of your RMD is tax-free if you transfer it to charity, but be sure you report it correctly on your return to avoid a tax bill.
- You are required to WITHDRAW and recognize as income a portion of your IRA each year. This is called a “Required Minimum Distribution” or RMD.
- The penalty for NOT satisfying the RMD is 50% of the amount that should have been withdrawn.
- Instead of taking a WITHDRAWAL, you can make a DIRECT DONATION of up to $100,000 from your IRA, to your favorite qualified charity, it will SATISFY the RMD requirement, but isn't added to your adjusted gross income.
Your IRA distributions are included in your AGI (adjusted gross income) and can impact your Medicare Part B premiums (cost is sliding scale and based on income recognized.)
- You cannot make a tax-free transfer from your 401(k) to charity, but you can roll over money from your 401(k) to an IRA and then transfer the RMD to charity.
- If you're 70½ or older, you'll have to take your RMD from your 401(k) before you can roll over the balance to an IRA.
- Allot the following lead time: 2 to 3 weeks.
Action steps needed:
- Request that your IRA Custodian mail a check DIRECTLY to the Charity from your IRA – you will need to sign and submit a form.
- You will need to provide the NAME, ADDRESS & Tax ID of the recipient Charity.
- It is important, that you are not the recipient delivering the check – the check should be made out to and sent DIRECTLY to your chosen charity.
- Report the distribution on line 15a of your Form 1040 as a gross distribution.
- On line 15b, write $0 for the taxable amount (if you have no other taxable distribution).
- Be sure to add "QCD" (for qualified charitable distribution) next to that line to explain why the distribution is tax-free.