Are you wondering whether your charitable contributions will be deductible next year? Though we don’t yet know what will be signed into law, both house and senate versions of the tax bill propose to raise the standard deduction to at least $12,000 for an individual and $24,000 for a married couple. If you itemize in 2017 but don’t expect to have enough deductions to meet this higher limit for 2018, there are two tax strategies we want you to know about.
- Regardless of your age, if you have cash available you could choose to prepay all or part of your 2018 contribution before the end of 2017. If you can itemize under current rules, but would be unlikely to itemize next year under proposed rules, you will increase the odds of tax benefits by taking an itemized deduction in 2017.
- If you are age 70-1/2 or over and have a traditional IRA (i.e., not a Roth IRA), you can make a qualified charitable contribution directly from your financial institution to the church. The money must not pass through your own non-IRA account in this process. Such a distribution counts toward the required minimum distribution (RMD). Qualified charitable distributions up to $100,000 per year are not counted as income, so they are never taxed. They also don’t increase your adjusted gross income (AGI) for figuring medical deductions, taxable social security income, and other calculations. There is no year-end deadline for these IRA distributions. You can instruct your financial institution to send a check to Pacific Beach United Methodist Church, or transfer the funds directly. Please contact the treasurer (through the church office) for account numbers if you wish to make a direct transfer to our bank.
Here is an excerpt from https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals.
What is a qualified charitable distribution?
Generally, a qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity. See Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs)) for additional information.
Can a qualified charitable distribution satisfy my required minimum distribution from an IRA?
Yes, your qualified charitable distributions can satisfy all or part the amount of your required minimum distribution from your IRA. For example, if your 2017 required minimum distribution was $10,000, and you made a $5,000 qualified charitable distribution for 2017, you would have had to withdraw another $5,000 to satisfy your 2017 required minimum distribution.
PB UMC is set up to handle prepayments and expense them evenly over the next year. Please let the financial secretary know if you make a contribution for a period other than the current month, so that we can account for it appropriately.
Note that the same strategies may apply to any other charitable contributions you make. We encourage you to contact your own tax advisor. You can also contact the treasurer or church office for more information.