You may have an interest in giving to charity through
outright gifts, bequests, or other "planned giving" strategies
(such as charitable gift annuities, charitable trusts, etc.
The American Taxpayer Relief Act of 2012 (ATRA) renewed the
opportunity for taxpayers over 70½ to make a contribution of up
to $100,000 directly to a qualified 501(c)(3) charity from
their IRA. This provision expired in 2011, but ATRA gives you
the chance to do this until February 1, 2013, and retroactively
for 2012. The great benefit of this provision is that you never
need to declare that IRA distribution as income; without this
rule, you would need to withdraw from your IRA and then take
whatever charitable deduction you were allowed on your 1040 -
meaning that you would still most likely be responsible for
some taxes on your withdrawal.
If you took an IRA withdrawal in December 2012, you will
still be able to characterize it as a charitable contribution
if you send it in cash to the charity by February 1, 2013,
"provided that the contribution would have been a 2012 QCD if
it had been paid directly from the IRA to the charity in 2012."
If you do this, you must be careful to file properly:
IRA owners who treat a January 2013 payment to a charity as
a 2012 QCD will add a note to their 2012 Form 1040 , U.S.
Individual Income Tax Return, by entering the QCD amount on
Form 1040 Line 15a, and entering the letters "QCD" next to Line
15b. The IRA custodian will report the QCD as a normal
distribution in the year it was paid.
You should also note that your 2013 RMD will be based on
your December 31, 2012 IRA account value after deducting your
January 2013 contribution - a good thing, since you'll then be
required to take less than you would have otherwise. Your 2012
QCD, no matter how large, will not count against your 2013
Like all IRS rules, there are plenty of strings attached.
Here are a few of them:
- You must be at least 70½.
- Contributions must be made only to 170(b)(1)(A)
organizations, which are "public" (50%) foundations and
501(c)(3) charities. This excludes donor-advised funds,
supporting organizations and private (30%) foundations
(except for conduit foundations and private operating
foundations). This is clearly something you will need to
review with your accountant before sending any checks.
- This only applies to contributions that would otherwise
completely qualify for the charitable deduction. This
excludes gift annuities, charitable remainder trusts, etc.;
the idea is that there can be no benefit to you from the
charity, other than their appreciation.
- The contribution must otherwise have been considered
- Payment must be made directly from your IRA trustee to
the charity (although it is OK if you deliver the check
yourself). If the check is payable to you, then it becomes
taxable income, and you will be left declaring the income and
taking a normal charitable deduction.
- You can take the distribution from any IRA except a SEP
or Simple IRA that is still active (receiving contributions).
You cannot take it from any employer plans (401k, 403b,
- You cannot also take a charitable deduction for the
- The QCD cannot be a split interest gift.
If you are charitably inclined and have an RMD that you will
not need, the QCD can be a great way to help a charity while
also helping your tax bill. Please remember to seek the advice
of both a CERTIFIED FINANCIAL PLANNER™ professional from FPA
and your CPA.
Copyright © 2010 FPA All Rights Reserved