IRA RMD Direct Transfer to Charity

I understand that for 2007 an IRA RMD can be made directly to charitible organizations without incurring income taxes. How is this effected? And is this more advantageous tax-wise than my taking the RMD, which would add to my income, and subsequently, making the contribution? Then, of course, I would add this amount to my charitible deductions on my income tax return.

PS Has anyone else had the difficulty I have encountered using this new format? It makes me feel stupid! 😳 🙄



See above posts, that answer your question.



I think most of your questions have been answered in the other posts. This direct contribution is much more beneficiary to the IRA owner than reporting the distribution and deduction the old way:
1) The distribution is NOT included in your AGI. Therefore, it will not negatively affect your medical deductions, aggregate personal exemptions and itemized deductions, misc itemized 2% floor etc.
2) Since you don’t itemize the contribution on Sch A, it is not subject to the 50% of AGI annual limit for charitable deductions for a year, and you DO NOT have to itemize to take full advantage of the gift. This is perhaps the largest benefit, since so many seniors take the standard deduction, and you still get that. Even for those that do itemize, the actual tax benefit for the gift was only the amount that exceeded the standard deduction, which was perhaps far less than the gift itself.
3) Any after tax basis from non deductible contributions stays in the IRA for use in reducing the future taxable portion of distributions.
4) The QDC does not count against the % of AGI limit for other charitable contributions made during the year.



Thank you very, very much for the clarification. I do not understand why my accountant did not inform me of this new development. Was it well publicized!!!

Janine



Yes, sure was. However, chances are that those involved in tax planning would be more on top of it than those just filing returns. I suppose that since the PPA was not signed until 8/17/06, the curriculum published by tax refresher fall update courses may have omitted the details that would affect 2006 return preparation.

If this QCD provision gets extended by Congress under pressure from the charitable lobby which is currently quite intense, it will also be a last minute change, and could even happen well into 2008. So if you are interested, you will probably have to specifically follow up on this issue. The inconvenience, as happened to many in 2006, is that if you take RMDs early in the year, they cannot be reconstituted as QCDs, which must be made out directly to a charity. So if you want to use part of your RMD for a QCD, it forces you to wait to see what happens and therefore to delay your distributions. So Congress is probably equally to blame if not more so than your accountant.



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