Yes, absolutely, churches qualify for QCD. A church or religious organization can become eligible to receive Qualified Charitable Distributions (QCDs) when it meets the set criteria. A Qualified Charitable Distribution (QCD) is a distribution from an Individual Retirement Account (IRA) made directly to a qualified charitable organization.
In general, qualified charitable organizations eligible to receive QCDs include tax-exempt public charities under Section 501(c)(3). This includes churches, synagogues, mosques, educational institutions, hospitals, and certain foundations that follow the guidelines set by the IRS.
When Do Churches Qualify For QCD?
A QCD can satisfy the required minimum distribution (RMD) for IRA owners who are 70½ years of age or older. The churches qualify for QCD when they fulfill the following criteria:
Tax-Exempt Status
The church must be recognized as tax-exempt under Section 501(c)(3) of the Internal Revenue Code (IRC). Most churches qualify for this tax-exempt status. Typically, churches that operate within the legal framework easily get tax-exempt status.
Non-Private Foundation
QCDs cannot be made into private foundations. The organization must be a public charity or a religious organization. Most churches are religious organizations and not private foundations, which is why gaining QCD eligibility is not difficult for them.
Compliance with IRS Rules
The church must comply with all relevant IRS rules and regulations for tax-exempt organizations. This includes filing the required annual reports and maintaining its tax-exempt status.
Before making a QCD to a church, it’s advisable to consult with a tax advisor or financial professional who can provide guidance specific to your situation and help ensure compliance with all IRS regulations. Tax laws and regulations can change, so staying informed about the latest requirements is essential.
Which Charities Qualify for a QCD?
Qualified Charitable Distributions (QCDs) can be made to a wide range of charitable organizations as long as they meet the IRS criteria for eligibility. The QCD eligibility criteria for a charitable organization must be:
- Public Charity: The organization must be a tax-exempt public charity under Section 501(c)(3) of the Internal Revenue Code (IRC). Most well-known charities, such as educational institutions, hospitals, religious organizations, and nonprofit foundations, fall into this category.
- Eligible 501(c)(3) Organization: While most public charities qualify, it’s essential to verify that the specific organization you intend to donate to is recognized as a tax-exempt organization under Section 501(c)(3) of the IRC.
- Not a Private Foundation: QCD eligibility does not allow the funds to be given to private foundations or donor-advised funds.
- Compliance with IRS rules: When churches qualify for QCD, they must be in good standing with the IRS and must not engage in activities that could jeopardize its tax-exempt status.
Common types of charities that generally pass the QCD eligibility test include:
- Religious organizations, like churches, synagogues, mosques, and temples
- Educational institutions, including schools, colleges, and universities.
- Hospitals and medical research organizations.
- Social service organizations that provide support for the needy.
- Environmental and wildlife conservation organizations
- Arts and cultural organizations, such as museums, theaters, and symphonies.
- Charitable foundations, as long as they are not private foundations.
While searching for all the data regarding the QCD eligibility, you can also look for churches that help pay bills.
How Do Charities Qualify for QCD?
While there is a lot of buzz around do churches qualify for QCD or not, the real question should be: how do they qualify? Before you reach the answer to this question, you must know that a QCD is a direct transfer of funds from an IRA to a qualified charity, such as a church.
This means that a church doesn’t receive funds directly from a government organization or any other specific organization, but benevolent seniors offer them for enhancement and betterment.
A QCD has several tax benefits, such as excluding the donated amount from taxable income and reducing the impact on certain tax credits and deductions.
To make a QCD to a church, the IRA owner contacts their IRA custodian and provides them with the information like the name and address of the church, the amount and date of the QCD, and the IRA owner’s member record number (if applicable).
The IRA custodian will then send a check directly to the church with the necessary information. The IRA owner should also record the QCD for their tax return and inform the church of their donation.
Limitations affecting the QCD
When churches qualify for QCD, there are certain limitations and rules that follow along with the eligibility. One must keep a check, or they can lose their chance at receiving these benefits. Here are few limitations and rules you must keep in mind after you are through with the eligibility:
The maximum annual amount for a QCD is $100,000 per individual (or $200,000 for married couples filing jointly).
- The QCD must be made directly from the IRA custodian to the charity. The IRA owner cannot receive the funds and then donate them to the charity.
- The QCD must be completed by December 31 of the year to count for that year’s RMD.
- The QCD cannot be made to a donor-advised fund, a supporting organization, or a private foundation.
- The QCD may be affected by any deductible IRA contributions made after age 70½.
People Also Ask
Do charities qualify for QCD? While this is a very popular question, there are three other most-asked questions surrounding the subject. Here are the answers to them:
Why is a QCD better than a charitable deduction?
QCDs provide greater tax savings than cash donations, for which charitable tax deductions are claimed.
Can you do a QCD from an annuity?
Yes. If a donor chooses to use a QCD to fund a gift annuity, they must use up the full extent of the opportunity within the same year.
How do I know if an organization is a qualified charitable organization?
You can check an organization’s eligibility to receive tax-deductible charitable contributions (Pub 78 Data) through the official website of the IRS.
The Bottom Line
Churches qualify for QCDs when they meet the IRS requirements for eligible charities. QCDs are a tax-efficient way to donate to a church from an IRA account, as they reduce the donor’s taxable income and count towards the required minimum distribution (RMD). It is advisable to consult a tax professional before making a QCD to a church.
