Tax and Money Tip of the Week:
Making Charitable Contributions
Directly from Your IRA
July 10, 2013 | No. 144
I recently spoke with a client who wanted to know whether he could still make a contribution from his IRA directly to his church and not have it be included in his taxable income for 2013. This always seems to be a popular topic of conversation this time of year.
He was referring to the Qualified Charitable Distribution (QCD) provision of the tax law that allows a tax-free distribution directly to a charity, up to $100,000, from your IRA if you are 70 ½ or older. This distribution also counts towards your Required Minimum Distribution (RMD).
The good news is that the IRS did extend this provision, but only through the end of 2013. Also, just to be clear, the provision is good for transfers to charities from IRAs only! Transfers from other types of retirement accounts (like 401(k)s) are NOT eligible.
In addition to the QCD counting towards your RMD, there may be other tax benefits. While the amount of the QCD is not available for you to use as a charitable donation on your tax return, the QCD is also not counted as part of adjusted gross income. This means that the QCD may help to limit phaseouts of tax deductions or credits as well as decrease the amount of your social security that is taxable and the amount of the new 3.8% surtax on investment income.
So if you are 70 ½ or older and give significant charitable gifts, you may benefit from this provision. Call us to setup a time to discuss if this would apply to your tax situation.
Questions or Comments?
Mark Vitek, CPA/PFS, CFP®
…until next week.