YOU MUST ACT BEFORE FEBRUARY 1, 2013 – CHARITABLE DONATIONS FROM YOUR IRA
The American Taxpayer Relief Act of 2012 extended a “taxpayer friendly” provision for 2012 and 2013 which provides for a “qualified charitable distribution” from a taxpayer’s Individual Retirement Account (IRA). This provision, which had “sunset” at the end of 2011, was widely expected not to be renewed.
A “qualified charitable distribution” (QCD) is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70 ½ or over that is paid directly from the IRA to a qualified charity. An IRA owner can exclude from gross income up to $100,000 of a qualified charitable distribution made for a year, and the “QCD” can be used to satisfy any required minimum distributions from the IRA for the year. The amount of a QCD excluded from gross income is not taken into account in computing your charitable contributions for the year. In other words, there is not a benefit.
The IRA owner can treat a contribution made to a qualified charity in the month of January 2013 as a 2012 qualified charitable distribution in either of the following circumstances:
- The contribution is a cash contribution to the charity of all or a portion of an IRA distribution made to the IRA owner in December 2012, provided that the contribution would have been a 2012 QCD if it had been paid directly from the IRA to the charity in 2012.
- The contribution is paid directly from the IRA to the charity, provided that the contribution would have been a 2012 QCD if it had been paid in 2012.
Records should be kept to substantiate the timing of contributions and distributions regarding any 2012 QCD made in January 2013.
A QCD made in January 2013 that is treated as a 2012 QCD will satisfy the IRA owner’s unmade 2012 required minimum distribution in the amount of the QCD equals or exceeds the 2012 required minimum distribution. However, no part of such a QCD can be used to satisfy the 2013 required minimum distribution.
Please call us if you think this provision might be something which would benefit you. Also, it is important to be certain that the specific charity qualifies.