Permalink Submitted by Alan Spross on Sun, 2007-08-19 23:53
The “qualified charitable contribution” was authorized under the PPA passed in mid 2006 and only included contributions made in the remaining 4 months of 2006 and all of 2007, when the provision expires. However, there is pressure in Congress from charities to renew the provision for future years. For the present, your 2007 contribution direct to an approved charity from an owned or inherited IRA is limited to 100,000, comes out of pre tax dollars, and your RMD can be considered as included in the distribution, making the distribution tax free. However, the contribution cannot be deducted on Sch A.
If you missed 2006, it is too late to re visit your IRA distributions for that year.
Permalink Submitted by Janine Janine on Mon, 2007-08-20 02:49
Thank you very much for your very clear explanation.
Another question: Are you allowed to transfer only a partial amount (as opposed to the full amount) of the RMD to a charitable organization and are you allowed to transfer to several different organizations?
Permalink Submitted by Alan Spross on Mon, 2007-08-20 04:13
Yes, you can split up the charitable distribution in any way you wish, there is no minimum amount. For example, you could request 4 checks in different amounts, each payable to a different qualified charity.
If the aggregate amount of qualified distributions does not cover the full amount of the RMD, you must still distribute the rest of the RMD and that remaining amount will be taxable. Let’s say your RMD was 5,000 and you requested charitable checks for 3,000. You must take out the other 2,000 and your 1040, line 15a would show 5,000, and line 15b, the taxable amount would be 2,000 and you would enter “QCD” next to 15b. That tells the IRS that the difference (3,000) was a direct charitable contribution.
Reporting gets more complex if your TIRA had non deductible contributions in it. You must then attach Form 8606, and in the above example, part of the 2,000 would be tax free, and all of the 3,000 would be considered pre tax dollars.
Permalink Submitted by [email protected] on Fri, 2007-08-10 21:56
Yes.
Permalink Submitted by Janine Janine on Sun, 2007-08-19 19:10
I am chagrined that I was not aware that this could be done in 2006.
Please explain the ruling and the process.
Thank you.
Permalink Submitted by Alan Spross on Sun, 2007-08-19 23:53
The “qualified charitable contribution” was authorized under the PPA passed in mid 2006 and only included contributions made in the remaining 4 months of 2006 and all of 2007, when the provision expires. However, there is pressure in Congress from charities to renew the provision for future years. For the present, your 2007 contribution direct to an approved charity from an owned or inherited IRA is limited to 100,000, comes out of pre tax dollars, and your RMD can be considered as included in the distribution, making the distribution tax free. However, the contribution cannot be deducted on Sch A.
If you missed 2006, it is too late to re visit your IRA distributions for that year.
Permalink Submitted by Janine Janine on Mon, 2007-08-20 02:49
Thank you very much for your very clear explanation.
Another question: Are you allowed to transfer only a partial amount (as opposed to the full amount) of the RMD to a charitable organization and are you allowed to transfer to several different organizations?
I truly appreciate your help.
Janine
Permalink Submitted by Alan Spross on Mon, 2007-08-20 04:13
Yes, you can split up the charitable distribution in any way you wish, there is no minimum amount. For example, you could request 4 checks in different amounts, each payable to a different qualified charity.
If the aggregate amount of qualified distributions does not cover the full amount of the RMD, you must still distribute the rest of the RMD and that remaining amount will be taxable. Let’s say your RMD was 5,000 and you requested charitable checks for 3,000. You must take out the other 2,000 and your 1040, line 15a would show 5,000, and line 15b, the taxable amount would be 2,000 and you would enter “QCD” next to 15b. That tells the IRS that the difference (3,000) was a direct charitable contribution.
Reporting gets more complex if your TIRA had non deductible contributions in it. You must then attach Form 8606, and in the above example, part of the 2,000 would be tax free, and all of the 3,000 would be considered pre tax dollars.