Charity Navigator & QCDs

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IowaFarmBoy
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Re: Charity Navigator & QCDs

Post by IowaFarmBoy »

jebmke wrote: Mon Mar 20, 2023 7:28 am
IowaFarmBoy wrote: Mon Mar 20, 2023 7:26 am
jebmke wrote: Sat Mar 18, 2023 5:32 pm
tomd37 wrote: Sat Mar 18, 2023 5:29 pm I do not understand the statement "The amount of QCD contribution limits for exclusion reduce after age 70 1/2." Please explain to this old mind.
If you make a contribution to an IRA after age 70.5, it reduces what can be excluded later until the contribution is clawed back.
Does this apply to both Roth and tradition contributions or only traditional? I found Kitces article on this and it specifically discusses traditional contributions as a problem but doesn't mention Roth.

My situation is that I am generally retired (currently 64) but have a very small amount of ongoing W-2 income that I have been contributing to a Roth IRA. We plan to start QCDs from an inherited IRA belonging to my wife after she is 70.5 and I will start QCDs after I turn 72.5. I can easily stop the Roth contributions at that point if necessary.
I would think only traditional. The intent is to block using an IRA as a real-time conduit for charitable contributions.
Thanks! That is the sense I got from what I read, but this idea was new to me so I really appreciate the confirmation.
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celia
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Re: Charity Navigator & QCDs

Post by celia »

delamer wrote: Sun Mar 19, 2023 11:08 am I found this, which seems pretty clear cut, assuming it is accurate (beware of what you read online, even on Bogleheads :wink: ):

What are the Rules?

Unlike most tax-related rules, the rules for QCDs are fairly straightforward:

You must be age 70½ or older.
The QCD must be made from a traditional IRA, Roth IRA, or individual retirement annuity, but not from a simplified employee pension, a simple retirement account, or an inherited IRA. . .


Source: https://www.robertprussocpa.com/qualifi ... from-iras/
This doesn’t sound right. You can’t contribute from a Roth IRA because the money needs to be money that would otherwise be taxed and Roth distributions aren’t taxed (unless you are under 59.5 or the Roth hasn’t been opened 5 years yet and you are now withdrawing growth after the contributions/ conversions were already withdrawn). Of course, you could always withdraw to checking, then write them a personal check. That could give you a tax deduction if you itemize. So that could be better than the QCD.

And what is a “simple retirement account”? Most likely, he meant to say a SIMPLE IRA. (SIMPLE is an acronym.)

And here’s a guest post on Ed Slott’s website saying QCDs can be taken from an Inherited IRA if you are over 70.5:
https://www.irahelp.com/slottreport/qcd ... rt-mailbag


So, I’ll agree with OP to not believe everything you read online. :!:
jebmke
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Re: Charity Navigator & QCDs

Post by jebmke »

celia wrote: Tue Mar 21, 2023 7:24 am So, I’ll agree with OP to not believe everything you read online.
For tax info, if I cannot corroborate from IRS documents I pretty much ignore online info.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Agent 99
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Re: Charity Navigator & QCDs

Post by Agent 99 »

You can make a QCD from a Roth but there is no tax advantage and it seems to make tax filing more complicated than necessary.

The instructions on the Fidelity form and IRS guidance:

Use this form to make a one-time, tax-reportable Qualified Charitable Distribution (“QCD”) from a Traditional, Rollover, Roth, inactive SEP, inactive SIMPLE, or Inherited IRA.


How do I report a qualified charitable distribution on my income tax return
?

https://www.irs.gov/retirement-plans/re ... ithdrawals

To report a qualified charitable distribution on your Form 1040 tax return, you generally report the full amount of the charitable distribution on the line for IRA distributions. On the line for the taxable amount, enter zero if the full amount was a qualified charitable distribution. Enter "QCD" next to this line. See the Form 1040 instructions for additional information.

You must also file Form 8606, Nondeductible IRAs, if:

you made the qualified charitable distribution from a traditional IRA in which you had basis and received a distribution from the IRA during the same year, other than the qualified charitable distribution; or
the qualified charitable distribution was made from a Roth IRA.


Form 8606 Instructions

Part III—Distributions From Roth IRAs
Complete Part III to figure the taxable part, if any, of your 2022 Roth IRA distributions.

Line 19
Don’t include on line 19 any of the following.

Qualified charitable distributions (QCDs). For details, see Are Distributions Taxable? in chapter 1 of Pub. 590-B.

Part III Form 8606

Complete this part only if you took a distribution from a Roth IRA in 2021. Complete this part only if you took a distribution from a Roth IRA in 2021. For this purpose, a distribution does not include a rollover (other than a repayment of a qualified disaster distribution (see 2021 Forms 8915-D and 8915-F)), qualified charitable distribution, one-time distribution to fund an HSA, recharacterization, or return of certain contributions…
prd1982
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Re: Charity Navigator & QCDs

Post by prd1982 »

Why would I make a QCD from a Roth? At best it is a wash. If you itemize, you would save money by treating the Roth as non-taxable income, and give money from your other taxable income (e.g., Social Security or pension).
Agent 99
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Re: Charity Navigator & QCDs

Post by Agent 99 »

prd1982 wrote: Tue Mar 21, 2023 12:19 pm Why would I make a QCD from a Roth? At best it is a wash. If you itemize, you would save money by treating the Roth as non-taxable income, and give money from your other taxable income (e.g., Social Security or pension).
The reason for my post was to show that one can indeed make a QCD from a Roth according to the IRS regulations. Probably because it makes no sense there was doubt that the IRS would allow someone to do it.
jebmke
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Re: Charity Navigator & QCDs

Post by jebmke »

Agent 99 wrote: Tue Mar 21, 2023 4:33 pm
prd1982 wrote: Tue Mar 21, 2023 12:19 pm Why would I make a QCD from a Roth? At best it is a wash. If you itemize, you would save money by treating the Roth as non-taxable income, and give money from your other taxable income (e.g., Social Security or pension).
The reason for my post was to show that one can indeed make a QCD from a Roth according to the IRS regulations. Probably because it makes no sense there was doubt that the IRS would allow someone to do it.
If a Roth is inherited by a non-spouse isn't there a clock on distributing out the assets? Whereas taxable assets would step up and not be subject to a distribution clock.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
IowaFarmBoy
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Re: Charity Navigator & QCDs

Post by IowaFarmBoy »

jebmke wrote: Tue Mar 21, 2023 4:56 pm
Agent 99 wrote: Tue Mar 21, 2023 4:33 pm
prd1982 wrote: Tue Mar 21, 2023 12:19 pm Why would I make a QCD from a Roth? At best it is a wash. If you itemize, you would save money by treating the Roth as non-taxable income, and give money from your other taxable income (e.g., Social Security or pension).
The reason for my post was to show that one can indeed make a QCD from a Roth according to the IRS regulations. Probably because it makes no sense there was doubt that the IRS would allow someone to do it.
If a Roth is inherited by a non-spouse isn't there a clock on distributing out the assets? Whereas taxable assets would step up and not be subject to a distribution clock.
As you've pointed out, there are situations where it makes sense to withdraw from a Roth. But in that case, why go through the filing and documentation hoops to make it a QCD? It seems like the simplest solution is to make a tax-free withdrawal from a Roth and then write a separate check to the charity. And if the person can itemize, this would reduce their taxes.
jebmke
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Re: Charity Navigator & QCDs

Post by jebmke »

IowaFarmBoy wrote: Tue Mar 21, 2023 5:05 pm
jebmke wrote: Tue Mar 21, 2023 4:56 pm
Agent 99 wrote: Tue Mar 21, 2023 4:33 pm
prd1982 wrote: Tue Mar 21, 2023 12:19 pm Why would I make a QCD from a Roth? At best it is a wash. If you itemize, you would save money by treating the Roth as non-taxable income, and give money from your other taxable income (e.g., Social Security or pension).
The reason for my post was to show that one can indeed make a QCD from a Roth according to the IRS regulations. Probably because it makes no sense there was doubt that the IRS would allow someone to do it.
If a Roth is inherited by a non-spouse isn't there a clock on distributing out the assets? Whereas taxable assets would step up and not be subject to a distribution clock.
As you've pointed out, there are situations where it makes sense to withdraw from a Roth. But in that case, why go through the filing and documentation hoops to make it a QCD? It seems like the simplest solution is to make a tax-free withdrawal from a Roth and then write a separate check to the charity. And if the person can itemize, this would reduce their taxes.
Good point. Also, I guess could make the withdrawal, donate appreciated taxable assets and then reinvest. That would only work up to 30% of AGI so there are limitations. But QCDs have limitations as well - caps at $100K.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
chemocean
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Re: Charity Navigator & QCDs

Post by chemocean »

Getting back to the original OP's question, this also will be our first year of QCDs.
I have already told the major offenders of sending numerous solicitations that this year's QCD will be inversely proportion to the number of solicitation we receive. The third party marketers probably don't care, because their incentive package is probably not affected by my strategy.
I plan to send my QCD check directly to the VP of development saying

"I informed your organization by phone, email and return USPS mail that I will be decreasing donations in proportion to the number of solicitations that I receive each year. Here is my check for $83.33 which is based on my target donation of $1000 along with evidence of your 12 monthly solicitations. For the following year, I will throw all you solicitation in a box and when it is time to make QCDs, I will divide my target donation for your organization by the number of your solicitations that are in the box. Also, please provide me an acknowledgement that I have received nothing of value from this donation of $83.33"
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Bogle7
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Annoyances

Post by Bogle7 »

chemocean wrote: Tue Mar 21, 2023 7:58 pmthis also will be our first year of QCDs..have already told the major offenders of sending numerous solicitations "
My hero.
Old fart who does three index stock funds, baby.
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celia
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Re: Charity Navigator & QCDs

Post by celia »

chemocean wrote: Tue Mar 21, 2023 7:58 pm I have already told the major offenders of sending numerous solicitations that . . .
Good luck with that . . . It can easily cost them more than $1,000 to change their procedures. And what if every donor made their own “rules”? I wouldn’t be surprised if they just stopped mailing you because you make their life “complicated”.

I was the treasurer of a small local non-profit. It was hard to just get any members to be officers each year as none of us were paid and most were retirees. We didn’t have any fundraising but just operated off of member dues and donations. If you dictated how anyone should do their “job”, they would either ignore you or quit.

Please consider the other side of the situation. Do you want your favorite charities to close up shop? If no-one continued their mission, the world would likely be worse off.
chemocean
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Re: Charity Navigator & QCDs

Post by chemocean »

celia wrote: Wed Mar 22, 2023 1:15 am
chemocean wrote: Tue Mar 21, 2023 7:58 pm I have already told the major offenders of sending numerous solicitations that . . .
I wouldn’t be surprised if they just stopped mailing you because you make their life “complicated”.
Then the objective has been reached to stop the solicitations.

I still have their address, I could still donate. My problem is with the waste of money and incentives package of the third-party marketing companies.
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