RMD to Charitable Organization
Good morning.
If an TIRA owner wants to give their RMD to a charitable organization that accepts such, how would the withdraw be treated for tax purposes if the TIRA was an initial rollover many years ago with no other contributions made? Is this even allowed?
Thank you!
K
Permalink Submitted by Peter Lingane on Thu, 2011-12-01 16:33
The rules for qualified charitable distributions are discussed in Notice 2007-7.
• An IRA owner or the beneficiary of an inherited IRA excludes distributions to charity from both AGI and itemized deductions for tax years 2006 through 2011.
• The distribution or distributions cannot exceed $100,000a year; this limit is per individual for those filing joint returns.
• The IRA custodian must pay the distribution directly to the charity.
• The IRA owner/beneficiary must have attained age 70½ on or before the distribution date. (Wait a couple of extra days since it is not absolutely clear how age 70.5 is determined in this circumstance.)
• The distribution must otherwise qualify as a deductible charitable contribution except that the AGI limitations do not apply and distributions to a §509(a)(3) supporting organization or a §4966(d)(2) donor advised fund do not qualify. A distribution is not a qualified charitable distribution if any part of the distribution is not deductible because of benefits received from the charity or if the usual substantiation requirements are not met.
• The distribution is treated as a distribution to the owner/beneficiary. The distribution satisfies the required minimum distributions. The prohibited transaction rules do not apply and a qualified charitable distribution could be used to fulfill a charitable pledge.
• The distribution can be from a traditional or Roth IRA but distributions from SEPs and SIMPLE IRAs do not qualify if the employer makes a contribution under the plan for the same tax year. For example, if a participant retired in 2010 and there were no employer contributions after 2010, she could make a qualified charitable distribution for the 2011 tax year assuming all of the other conditions are met.
• The distribution is from the taxable portion of the IRA to the extent possible. For example, 99% of any distribution from a million dollar IRA with $10,000 basis would normally be taxable income and 1% would be recovery of basis. However, a $100,000 qualified charitable contribution from one or more IRAs with a million dollar aggregated value and $10,000 aggregated basis leaves a $900,000 IRA with $10,000 of basis.
• There is no carryover provision. If an IRA owner/beneficiary distributes more than $100,000 to charity in a given year, the excess distribution (less recovery of basis) is taxable income and may qualify as a charitable contribution on Schedule A.
• A qualified charitable distribution is not subject to withholding
• A distribution which is treated as a qualified charitable distribution does not also qualify as a Schedule A itemized deduction.