Are QCDs Available for 2015? | Ed Slott and Company, LLC

Are QCDs Available for 2015?

By Beverly DeVeny, IRA Technical Expert
Follow Me on Twitter: @BevIRAEdSlott

The leaders of Congress promised us that they would deal with the issue of expired tax breaks early in the year so that the American public could proactively go forth with their tax planning based in reality. Well, that didn’t happen. It appears that neither Republicans nor Democrats have the ability to pass timely tax legislation. So, here we are again.

QCDs (qualified charitable distributions) were first enacted as part of the Pension Protection Act of 2006. They expired in 2007. They were renewed in 2008 and expired in 2009, were renewed in 2010 and expired in 2011, were renewed in January 2013 for 2012 and 2013, and were renewed for 2014. Now it is mid-December 2015 and we still do not know if we can use the provision for 2015 – again.

Think about this for a minute. It means that paper tax returns and instruction booklets cannot be printed or will have to be reprinted and tax software cannot be finalized for both vendors and IRS. All because Congress cannot get its act together.

A QCD is an IRA distribution that goes directly to a qualifying charity. The amount transferred is NOT included in the IRA owner’s income for the year. The IRA owner or beneficiary must be at least age 70 ½ at the time of the distribution. Spouses who both qualify can each do a QCD. QCDs are capped at $100,000 per IRA owner, per year.

The QCD can satisfy your required minimum distribution. The benefit to this type of transaction is that the amount transferred is not included in income for the year. There is no charitable deduction either. By not including the distribution in income you can potentially avoid the loss of exemptions, deductions, credits and phase outs, AMT (alternative minimum tax), the 3.8% surtax on net investment income, and the increase in Social Security premiums for Medicare Part B and Part D.

There is no reporting required on the part of the IRA custodian. They are going to issue a 1099-R showing the distribution as taxable. You take care of the reporting on your tax return.

From all indications, it is likely that Congress will renew this tax provision. However, it only has a little more than two weeks to get it done before the end of the year.

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