over 70 1/2 and making a charitable cash donation
We have a client that requested a $25,000 cash charitable donation from her IRA last year tax free….our client is looking to again make another $500 cash charitable donation from IRA tax free in 2010. Can clients over 70 1/2 still have this tax free option or did this program end?
Permalink Submitted by Alan Spross on Mon, 2010-06-07 19:58
The provision for the QCD did expire in 2009, however there is a very good chance it will be extended since it is included in the extender bills currently pending in Congress. Probably the only issue that could derail it is concern over the increasing budget deficit.
If the client wants the QCD to be applied to their RMD for 2010, they need to wait for the extension to be signed into law before taking distributions.
Permalink Submitted by mk foss on Tue, 2010-06-08 17:36
The last time they extended this provision they made it retroactive to the begining of the tax year.
I don’t see a downside from requesting an amount come from the IRA and go to the charity for someone over age 70-1/2. If the provision is not enacted, the payment to charity will be treated as a distribution to the owner and a charitable deduction will be available. If it is enacted, it doesn’t increase income and no deduction is available.
Permalink Submitted by Alan Spross on Wed, 2010-06-09 01:08
I agree that the transfer to a charity would likely be retroactive, but my suggestion not to take another IRA distribution earlier is based on this first distribution being deemed to apply to the RMD amount and therefore taxable. A subsequent transfer to an approved charity would not be included in income, but could not be applied to the RMD to the extent that the RMD was already satisfied. The net result is that you would have a taxable RMD in addition to the non taxable QCD.
This is another example of taxpayers losing some or all of the advantage from certain provisions caused by Congress’ continued failure to pass tax legislation prospectively.
In this case, they would need to allow an extended rollback of earlier RMD distributions similar to what they did in 2009 in order to allow distributions taken early in the year to be rolled back to the IRA in order to have the RMD waived. But even that exception did not do the job for those who were not eligible for the rollover due to the one rollover rule.