December 29, 2014

By: Judson M. Stein

Year-End Qualified Charitable Distribution Opportunity

H.R. 5771, otherwise known as the “Tax Increase Prevention Act of 2014” (TICA) was signed into law on December 19th. TICA gives those individuals who take action before the end of 2014 a short window of opportunity to take advantage of several beneficial income tax extensions.

One such extension provision, the individual retirement account charitable distribution, permits philanthropically-inclined individuals to exclude up to $100,000 from their gross income. Those individuals with IRAs that presently force the payment of required minimum distributions (RMDs), i.e. those who are over 70 ½ years of age, may exclude up to $100,000 of income from RMDs distributed by their IRAs by having their RMDs distributed directly to a qualifying public charity. By accepting an RMD directly rather than taking advantage of the direct charitable distribution extension, individuals who itemize their deductions will increase their adjusted gross income, thereby reducing or eliminating deductions that are calculated or phased-out based upon adjusted gross income levels.

Those individuals who may have already made distributions to qualifying charities from their IRAs prior to the passage of TICA may still elect before year-end to have those distributions qualify for the income exclusion. However, individuals that have already deposited their required minimum distribution checks may not retroactively elect to qualify their RMD for the charitable income exclusion.

One should note that in order to take advantage of the qualifying charitable distribution, the distribution must be made by the IRA custodian before year-end. As such, one should contact their plan custodians as soon as possible to make sure that their requests are processed and completed before the year-end deadline expires.

Tag: Income Tax Planning