QCDs (Qualified Charitable Distributions) are Back

Wednesday, December 22, 2010

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

With the signing of the 2010 Tax Act last week, qualified charitable distributions (QCDs) from IRAs have been extended for 2010 and 2011 – with a twist.

Since the bill was passed so late in the year, which by the way should mean that you have already taken your required distribution (RMD) for 2010, Congress included in the law the option to take a distribution in January, 2011 and elect to use it as a 2010 QCD. You can also elect to use the QCD to satisfy your 2010 RMD. IRS is charged with writing the rules for making this election.

Here is a quick review of some of the QCD rules.

  • The QCD is capped at $100,000 for IRA owner or beneficiary, per year regardless of the amount of your RMD
  • It can be used to satisfy all or part of your RMD
  • You must be 70 ½ at the time of the transfer
  • The distribution must be of taxable funds and come from an IRA, Roth IRA, inactive SEP or inactive SIMPLE
  • It must be a direct transfer to a qualifying charity
  • You get no deduction for the QCD and you do not have to include it in income
  • The charitable substantiation rules apply
  • You can get nothing back for the contribution, no mug, not tickets, etc
  • The QCD cannot go to a supporting organization or donor advised fund

Hopefully this information comes in time for your use in 2010. We will let you know how the election to use a January, 2011 distribution for 2010 is made once IRS releases guidance on this.

Happy Holidays, everyone. 

 

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