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Our annual give it away meeting

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AUTHOR: R Quinn on 10/04/2024

Connie and I just had our annual financial meeting- how best to give money away. 

Every since I discovered QCDs – you know what that is, right, I enjoy avoiding taxes on a RMD. 

As long as I have to take the money out of my IRA, I like putting it to good use – tax-free if possible.

Where does it go? A chunk goes to church and several religious organizations- Connie’s call. 

We give to a food pantry on Cape Cod and one local. Colonial Williamsburg receives an annual gift as does St Jude’s Children’s Hospital. 

We divide about 20% of the RMD among our children. From what’s left I take withholding for all the taxable portion of the distribution and transfer the meager balance to a money market fund. 

We’re done for another year with the hope the stock market will replenish it all.  So for, so good.

There is one flaw in our otherwise sound plan. During the year there are numerous request from local organizations like volunteer firefighters, the PBA, Scouts, schools, etc. and Connie makes good use of the account designated Connie’s checking. The flaw, they aren’t tax-free or deductible, because we use the standard. 

Nevertheless, we feel it’s money well spent or rather well used. It’s good being 80 something and able to give. 

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Jeffrey Rapp
20 days ago

QCDs are a great way to give! One small word of caution: when you’re using QCDs, you’re responsible for making sure that everything’s documented properly. Meaning, you’ll still need a letter from the charity stating you’ve received nothing in return for your donation (just like you would if making any donation and deducting it), and you’re responsible for making sure the check is cashed. You don’t want to find yourself in a pickle if that check you sent in November somehow gets lost. For this reason, QCDs early in the year might be a good option overall.

Linda Grady
29 days ago

Thanks, Dick, and all the others who have recommended a QCD. This will be my first year taking RMDs, and the same day this was posted (but before I read it), I wrote to my financial planner telling her that this is what I want to do with most of the RMD. Like Connie, I write a number of small charitable checks during the year, and I’ve also decided not to worry about the taxes I will pay on that money. Even though I don’t manage my own portfolio, I’ve learned so much about personal finance in the four years that I’ve been reading HD. I’m very grateful to Jonathan, but also to you, Marjorie, Kathy, and so many others too numerous to mention!

Marjorie Kondrack
18 days ago
Reply to  Linda Grady

Linda, feel very honored to know that I may have helped you in some small way. Thank you.

Winston Smith
30 days ago

Richard,

Thanks for describing your strategy!

This post gets bookmarked for when we have to start taking our RMDs.

L H
30 days ago
Reply to  Winston Smith

I am also interested in saving posts that I want to apply in my life. How do I bookmark an article

Jonathan Clements
Admin
29 days ago
Reply to  L H

Your web browser should allow you to bookmark pages.

Linda Grady
29 days ago
Reply to  L H

Sometimes I just email the link to myself, open it, print it and save it for a while. After I’ve read it a second or third time, I usually remember enough to be okay with recycling the paper – or keep it.

Humble Reader
30 days ago

We started doing QCD contributions this year even though my first RMD will not be until next year. I enabled check writing from my Rollover IRA. This is now our only pre-tax account that will have an RMD. We call the checks for this account our “QCD checks” since we only use them for that purpose.

I created a list of the organizations we give to and verified their 501c3 status and tax ID numbers and downloaded their 990 reports.   There are no 990’s for churches and state universities.

As the cashed checks show up in the IRA account records I save PDF images of these. As the charitable donation receipts arrive I scan and save these.

Our intention is that 100% of the donations be tax deductible so the amount withdrawn from the IRA for the QCDs will not increase the amount of tax we owe. Most of the organizations correctly interpret how to handle when part of the donation is also a “membership” which provides certain benefits such as discounted entry to a museum or receiving the organizations magazine. These incidental benefits are tax deductible. But one of the museums we donate to insists that $10 of our donation is not tax deductible while the other museum, which provides more generous membership discounts, says that all of the donation is tax deductible. We will let our accountant figure it out.

The only other issue I have is that my spouse and I differ in how we calculate our generosity. I use the total dollar amount we give. My spouse counts the number of checks written. We will work on this.

Linda Grady
29 days ago
Reply to  Humble Reader

Thanks, Humble Reader, for these details. They will help me when I set up my QCD account in a few weeks (see my comment replying to Dick Quinn).

stelea99
30 days ago

QCDs are a very important tool for doing something good and saving on taxes at the same time and I salute you for using it. I wonder if your IRA custodian offers check writing for your IRA? Schwab does, and this gives a person the opportunity to make all those smaller charitable donations during the year. If you had check writing, next year you could mentally set aside a amount for these miscellaneous charitable gifts, and write checks for them all year as you needed to. The only QCD requirement that you have to be careful for is the need for a written acknowledgment of each gift. (Note: some check writing plans might have a minimum.) So, you need to send a form letter along with the check. If your custodian doesn’t offer check writing you lose a lot of flexibility. Having to go on line and deal with having to have the custodian send the check is a PITA. If you had the checkbook, Connie could still write the check, but you would have to sign them.

Linda Grady
29 days ago
Reply to  stelea99

Thanks for pointing this out. Having check writing privileges does sound easier – just yesterday I sent out several small checks which was faster and easier than accessing those organizations online. In one case, a magazine subscription, the 2-year deal offered via snail mail wasn’t available from the online subscription renewal service that the magazine is using. Glad I always have a bunch of Forever stamps, and the P.O. is a short walk away.

Mike
1 month ago

I have a question on QCDs. My wife has been taking RMDs for a few years and just passed away in August. I will be rolling her IRA into mine (I’m below age 70.) I need to take her RMD this year (she hadn’t taken it yet) and was wondering if I could take it as a QCD. I’m not eligible since I’m not 70-1/2, but she would have been. I’ve asked this on Bogleheads and the answer I got was no to QCD since it is my distribution. Any thoughts?

Michael1
30 days ago
Reply to  Mike

Mike, I’m sorry for your loss.

Editing my comment to point out Willam Perry’s below, citing a IRS pub saying you have to be 70 1/2 to take the RMD as a QCD.

Btw, you may not know there are other options besides rolling your wife’s IRA into yours. Besides looking at what the IRS says, I’d ask the custodian of your current IRA about your options for how to treat the account.

https://www.irs.gov/publications/p590b

Last edited 30 days ago by Michael1
William Perry
30 days ago
Reply to  Michael1

It is unclear to me that the IRS rules permit him to claim a QCD exclusion from taxable income from a distribution from a IRA inherited from his spouse as he stated he is not yet age 70 1/2.

Per IRS Notice 2007-7 Q/A #37-

Q-37. Is the exclusion for qualified charitable distributions available for
distributions from an IRA maintained for a beneficiary if the beneficiary has attained age
70½ before the distribution is made?

A-37. Yes. The exclusion from gross income for qualified charitable distributions
is available for distributions from an IRA maintained for the benefit of a beneficiary after
the death of the IRA owner if the beneficiary has attained age 70½ before the
distribution is made.

https://www.irs.gov/pub/irs-drop/n-07-07.pdf

Last edited 30 days ago by William Perry
Michael1
30 days ago
Reply to  William Perry

Thanks for sharing that. I did some other looking and it does indeed look like the beneficiary has to be 70 1/2. I’m going to edit my original note above so people who don’t read all the way down don’t leave with bad info.

Michael1
30 days ago
Reply to  R Quinn

Yes, Mike does have to take the RMD.

Enjoyed the article btw.

.

Last edited 30 days ago by Michael1
bbbobbins
1 month ago

Sounds great. Possibly the happiest day of the year. An acknowledgement that you have won life’s lottery and therefore can enjoy seeing others benefit from your spare wealth.

baldscreen
1 month ago

Always love seeing posts about giving on HD. And this place is where I learned that you can use your required minimum distributions to make qualified charitable donations so you don’t have to pay taxes on that part that you give. We are not old enough yet to do either RMD or QCD but plan to do this when we are old enough. Thanks for the reminder to everyone. Chris

Dan Smith
1 month ago

Jeez Richard, you’re going to ruin your reputation with posts like this!
QCD’s are often overlooked by those old enough to take advantage. I was able to get several of my tax clients to use them after the standard deduction was changed in 2017.

Dan Smith
1 month ago
Reply to  R Quinn

I like to thing of Dick Quinn as Dana Carvy’s Grumpy Old Man’s character from Saturday Night Live.
“That’s the way it was….. and we liked it!

bbbobbins
1 month ago
Reply to  Dan Smith

I think more of Monty Python’s 4 Yorkshiremen

Well o course we had it tough. We used to have to get up outta shoebox, in middle of night, and lick the road clean with our tongues. We had half a handful of freezing cold gravel, worked at mill for 24 hours for a penny a year, When we got home, our dad would slash it in two with bread-knife.

Dan Smith
1 month ago
Reply to  bbbobbins

Ha, used to love MP. That’s hilarious BB.

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