Qualified Charitable Distributions

Perhaps lost in all the posturing about what would become of the Bush tax cuts was a valuable extension for qualified charitable distributions. The 2010 Tax Relief Act extended the tax-free distributions from Individual Retirement Accounts (IRAs) for charitable purposes through 2011, i.e., Qualified Charitable Distributions (QCDs).

Briefly, we all know distributions from IRAs must be included in gross income in the year of distribution, and income taxes must be paid on the taxable portion of distributions. A QCD allows IRA owners and beneficiaries age 70½ and older to make tax-free distributions of otherwise taxable dollars from traditional IRAs to qualified charitable organizations. These distributions are also allowed to be made from SEP IRAs and SIMPLE IRAs as long as no employer contributions were made for the same tax year. These QCDs are limited to $100,000 per year, per IRA owner or beneficiary, and the check has to be payable directly to the eligible charity.

I will be sharing more details about this excellent charitable planning opportunity in the coming months. If you are interested in learning more, please consult your financial advisor.