CHARITABLE CONTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS
CHANGE IN THE LAW. Congress has just made permanent a great technique for making charitable gifts. You ae now permitted to make charitable contributions directly from your Individual Retirement Account. This is a technique that was approved on a temporary basis in the past, but now you can work this into your charitable gift planning with the assurance that it will be available in the future. In the statute, this is called a QUALIFIED CHARITABLE DISTRIBUTION (QCD, for short).
HOW DO YOU DO IT? It is vital that the transfer to the charity occur directly from your IRA account. If the IRA administrator writes the check to you, you lose the benefit of the QCD. The IRA administrator must write the check directly to the charity.
WHY IS THE QCD BETTER THAN A DIRECT CONTRIBUTION FROM YOU?If you receive the distribution from your IRA in your name, the increase in Adjusted Gross Income on your federal income tax return may expose more of your Social Security benefits to taxation, can lessen the available amount of current deductions and can limit the amount of the contribution you can claim as an itemized deduction. And, once the Social Security Administration reviews your adjusted gross income numbers, you might experience an increase in Medicare premiums.
REQUIREMENTS FOR A QUALIFIED CHARITABLE DISTRIBUTION. There are a few hurdles to jump. First, you must be over 70 ½ years old when the QCD occurs. The charity must qualify for charitable income tax deductions, and the charity must provide written acknowledgment of the gift.
IMPORTANT RESTRICTIONS. Simplified Employee pension plans, simple retirement accounts and inherited IRA accounts are not eligible for Qualified Charitable Distribution treatment. The distributions can be made from any other Individual Retirement Account.