RE: Qualified Charitable Distribution
We appreciate your interest in making a charitable contribution to Muslims for Progressive Values.
QCD’s or Qualified Charitable Distributions have been part of the tax code since 2015. It is only after 2018 that the value of QCD’s has increased dramatically. Why did this happen? The 2018 Tax cuts and jobs act of 2017(TCJA) increased the standard deduction dramatically while limiting the deductibility of mortgage interest and taxes. This encouraged many individuals to no longer itemize their tax deductions. Charitable giving was not affected by the TCIA but since many individuals no longer itemize, there is no tax benefit for charitable contributions. This is where QCD’s come into play. QCD applies only to Retired Individuals over 70.5 years old. The IRS requires that starting with the year they reach 70.5, individuals with a Traditional IRA take Required Minimum Distribution (RMD). The calculation of RMD is complex but it is performed by the company (IRA Custodian) holding the IRA funds. Incidentally, you must take the RMD or you will be subject to a 50% penalty. QCD applies only to Traditional IRA’s not to 401(K) or Roth IRA’s. QCD works very simply. Assume, your RMD is $18,000. You decide to donate $5,000 to MPV and convey this information to your IRA custodian. The custodian sends you a check for $13,000 and $5,000 to MPV.
Your RMD requirement for $18,000 has been met. But you only have to report $13,000 toward your income. Effectively you have been able to deduct your charitable contribution without having to itemize!
Custodians are diligent about forwarding your contribution to us. They are frequently lax about informing the charities about the details of contributions. We would like to acknowledge your generosity and thank you personally. If you decide to make a QCD through your custodian, please inform me, Anwar, at email@example.com. Please include the date and amount of your contribution, name of your IRA custodian, their phone number, and your contact information. We will follow up with the custodian and contact you with our thanks when everything is completed.
Still not clear? Text me at 617-515-9147. I will set up a time for us to talk on the phone and answer your questions.
Please note: Your charitable contribution from your IRA is also considered part of your Zakat requirements.
Director of Planned Giving
Muslims for Progressive Values