QCD

Submitted by Katherine L. Maxwell on Thu, 2016-04-28 14:43

1) How many years was the QCD in and out of the tax code before it became permanent last year?

2) What was the driving factor that got the QCD into the law in the first place?

3) Are terms like “tax neutral” or “tax-free” appropriate to use in explaining QCD to clients? Or, are there are other terms we can use?

4) In IRS Publication 526, it says a QCD may be given to “certain qualified organizations.” I understand “qualified” organizations, but what does “certain” mean in this context? Does it mean some qualified organizations are excluded from a QCD? If so, what kinds?

Thank you.



Submitted by Alan - IRA critic on Thu, 2016-04-28 16:24

  1. The QCD first became available in 2006 as a temporary 2 year provision. After that it was generally extended for 2 years at a time until it became permanent, and there were no years after 2006 that it was not allowed at all.
  2. Since Congressional legislation including the Pension Protection Act represents a series of political compromises, it is impossible to determine how it got into the PPA. However, the charitable lobbies certainly were solidly behind the QCD provision.
  3. No. The QCD is only neutral in the most negative scenario. Generally, it is much more beneficial than a regular charitable contribution because it does not increase AGI, is not subject to charitable deduction income limits and carryovers (just the 100k dollar limit), eliminates the need to itemize deductions which most seniors do not qualify for, helps reduce AGI for IRMAA purposes, reduces pre tax IRA dollars but not IRA basis, and the reduced AGI also holds all several other AGI based phaseouts. In summary, almost all taxpayers will benefit from a QCD in some form as compared to a non QCD donation.
  4. Donor advised funds and private foundation donations do not qualify for QCD donations.

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