Render Unto Caesar: Required Minimum Distributions
Matthew, Mark, and Luke all report that Jesus said, “Render unto Caesar what is Caesar’s, and unto God what is God’s.” Notice that the guidance does not say give generously to Caesar, nor does it say give any more than Caesar requires or mandates. If we interpret Caesar to be the federal government, or more specifically the IRS, these verses seem to say pay what the law requires, but not a nickel more, because that belongs to God, not Caesar. If the tax law is written so there are options that allow us to lawfully pay less, shouldn’t we, as God’s stewards, do that? This is the second in a series of brief articles that will each discuss a way to take advantage of the tax laws to minimize what we render unto Caesar (US government) so that more can be given to God.
Itemized deductions for things like our church offerings and tithes may no longer be worth itemizing because the standard deduction for a couple is now (for 2022) nearly $26,000. However, there are still some ways to reduce what we render unto Caesar when we give to God.
Today we discuss an option that is limited to only those people over 70½ who have a tax-sheltered retirement account (IRA, 401(k), TSP, 403(b), etc.). The federal government mandates withdrawals for such accounts when the owner turns 72. Such mandated withdrawals are known as Required Minimum Distributions (RMDs).
Folks over 70½ who have an IRA or 401(k)-type account can transfer money directly from the IRA account to the church, and the withdrawal will not be counted as taxable income.
Even though the age for RMDs has been raised to 72, 70½-year-olds can still make tax-free transfers. It can be a very simple process. For my aunt and mother-in-law, we merely went to their brokers and got them a checkbook with checks that draw directly from their IRAs. They now use those checks to donate to their church (and other charities).
Another option would be to simply transfer stocks directly from that IRA or 401(k).
Please note, many companies that manage retirement accounts, like the Federal Government’s TSP (which is their 401(k) equivalent), will not pay RMDs to charities. In that case, members need to roll over a portion of that restricted account into an IRA. From there, they can make payments directly to the church or charity. The full value of the transfer counts towards the RMD requirement. The church has no issue, and the donor’s RMDs are reduced up to 100% by whatever they give. Thus, donors give what they want to the church but pay no tax on the money that came out of their IRAs.
The Foundation can assist with stock transfers with no fee or commission, sending the full value to the church.
If your church or Finance Committee would like to learn more about such tax-efficient giving, please contact us. We can speak by phone, video conference, or even hold a group meeting at your church to present options on tax-efficient giving. As ownership of stocks and mutual funds grows among church members, with those assets often in IRAs and 401(k)-type accounts, we want to help them be good stewards by providing them a way to legally give more to God and less to Caesar.
(This article discusses certain aspects of the tax code but it is not official tax advice. For specific tax questions or issues you should always consult a qualified tax professional.)
By Brad Duty
Foundation Services Advisor
Image by Alexander Grey, courtesy of Unsplash