Qualified Charity

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Qualified Charity

A non-profit organization in the United States devoted exclusively to religious, charitable, scientific, educational, or other similar purposes. Qualified charities are not allowed to lobby for political candidates. Qualified charities are exempt from federal taxation and, in most cases, contributions and donations made to them are also tax exempt. For this reason, many philanthropic foundations do not provide grants to organizations that are not qualified charities.
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Give from Pretax Assets by Making a Qualified Charitable Distribution (QCD) from Your IRA: IRA owners who are 70 1/2 or older can contribute up to $100,000 from their IRAs ($200,000 per couple) to qualified charities each year.
Most CPAs practicing in the not-for-profit sector understand what a donor advised fund (DAF) is and how it is used to benefit both donors, as well as to enable philanthropic giving to qualified charities as its beneficiaries.
Deductions for the fair market value (FMV) of contributions made to qualified charities are limited by the taxpayer, type of property donated, and the charitable organization.
* DAF grants to qualified charities totaled some $14.5 billion, up 16.9% from 2014
The tax-free treatment of charitable donations from IRA accounts lets these taxpayers directly transfer an RMD of up to $100,000 per year ($200,000 per couple if each spouse has a separate IRA) to a qualified charity without increasing their tax burden (qualified charities include organizations such as churches and hospitals -- most private foundations and donor-advised funds are excluded).
(2) To qualify as a CRAT, a trust must provide 1) at least annually to one or more then-living noncharitable beneficiary(ies) in what must be the sole noncharitable distribution, a fixed-dollar annuity ranging from 5 percent to 50 percent of initial trust asset fair market value (FMV) for the beneficiary's life or for a maximum 20-year term; and 2) at termination, the entire remainder interest with an actuarial value of at least 10 percent of initial trust asset FMV (tested at inception, not termination) must pass to one or more qualified charities. (3) The CRUT requirements are essentially identical, except that the annual noncharitable distribution must be a unitrust amount between 5 percent and 50 percent of annually determined trust asset FMV.
1.642(c)-1 provides for a charitable deduction for amounts paid in the current year and the following year to qualified charities. There is no longer a provision for deducting amounts set aside for charitable purposes unless the organization is part of a pooled charitable trust or was organized before 1970.
* Qualified charities. Check that the charity is eligible.
The provision allowed IRA holders 701/2 years old--the same age at which they are required to receive taxable distributions from their IRA--to donate up to $100,000 tax free to qualified charities. An extension, which could be retrofit to include 2014, awaits passage by Congress.
Distributions must also be made to qualified charities no less frequently than every five years.
As mentioned above, because of the tax-exempt status of qualified charities, they can receive the benefits free of income tax, effectively making the benefits more valuable to the charity than they are to a noncharitable beneficiary.
You can check online with the Internal Revenue Service, which maintains an online list of qualified charities (www.irs.gov/app/pub-78).

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