Reminder: Qualified Charitable Distributions From IRAs Have NOT Been Reinstated

By Joe Cicchinelli, IRA Technical Expert

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Many advisors and the public have asked us about the status of Qualified Charitable Distributions (QCDs) for 2014. QCDs, also known as charitable IRA rollovers, expired after December 31, 2013. While it was widely expected that Congress would reinstate them, as of today they have not yet been reinstated for 2014.

The QCD was a temporary tax provision created by the Pension Protection Act of 2006. It was extended by subsequent laws in two-year increments until it expired December 31, 2013. Earlier this year, the U.S. Senate failed to vote on a package of expired tax provisions that included an extension to the IRA QCD option. Over the years, Congress has a history of allowing the QCD option to expire then renewing it, usually retroactively, to the beginning of the year. While we cannot guarantee it, we believe that Congress will likely reinstate QCDs sometime this year.

QCDs were a way to make a charitable donation from your IRA on a tax-free basis as long as certain rules were followed. The IRA distribution will be tax-free as long as the money is paid directly to a qualifying charity. The distribution has to be made from an IRA only, including Roth IRAs and inactive SIMPLE and SEP IRAs. It does not apply to a company retirement plan such as a 401(k) plan. It applies to IRA owners or beneficiaries who are age 70 ½ or older at the time of the distribution and is capped at $100,000 per person per year.

Another feature is that the charitable donation from the IRA will satisfy a required minimum distribution (RMD), but the IRA distribution is tax-free. So, if you’re giving money to charity anyway, you might want to consider using a QCD to do so, assuming Congress reinstates them. Hopefully Congress will reinstate QCDs for 2014, but it’s important to remember that they haven’t done that yet. We’ll keep you posted on the status of QCDs.