Qualified IRA Charitable Distribution Law in 2015

Qualified IRA Charitable Distribution Law: The QCD Remains in Limbo Again This Year

Once again we must advise taxpayers over age 70½ to procras­tinate taking their required minimum distri­b­ution (RMD) this year if they have chari­table inten­tions. We advised waiting last year because the tax law provision that allowed Qualified IRA Chari­table Distri­b­ution (QCD) ended on December 31, 2013. We hoped Congress would act to reinstate the provision in 2014. Our patience was rewarded in mid-December with a temporary extension of the provision. Unfor­tu­nately, it was only extended for 2014. Now we must wait to see if it will be extended again for 2015.

The ability to give directly to a charity from your IRA is a very important tax advantage for certain taxpayers. The provision allows IRA owners who are 70½ to give directly to a charity and avoid reporting the income on their tax return. Taxpayers who take the standard deduction receive no benefit from chari­table deduc­tions, unless it comes out of their IRA. A QCD lowers modified adjusted income (MAGI), which could lower or eliminate the taxation of Social Security benefits. Lower Medicare premiums are possible for those with higher income because MAGI is the trigger point that can be helped by a QCD.

The distri­b­ution must go directly from your IRA custodian to the charity to qualify as a QCD. The charity needs to acknowledge the gift for your records. You must then report the gross amount of their distri­b­ution on line 15a of tax form 1040, and then carry over only the taxable amount to line 15b. If the entire distri­b­ution went to the charity, then this number will be zero. Write “QCD” next to line 15b to further identify the trans­action.

Hopefully Congress will act quickly this year to extend the QCD provision or finally make it permanent. However, that has not been their track record in the past, so get ready to wait.