Tax Tip #14 Gifting Your IRA to Charity is Still Allowed
The American Taxpayer Relief Act of 2013 extended, for 2012 and 2013, tax-free gifting your IRA to charity for taxpayers age 70½ or older. Special rules apply for distributions made in December 2012 and January 2013 to allow certain of these transfers to qualify as tax-free.
Several special transition rules were included in ATRA to enable taxpayers to have a donation made before February 1, 2013, treated as a 2012 QCD.
A QCD is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity. An IRA owner can exclude from gross income up to $100,000 of a QCD made for a year, and a QCD can be used to satisfy any IRA required minimum distributions (RMDs) for the year. Also, the amount of a QCD excluded from gross income is not taken into account in determining any deduction for charitable contributions.
(See IRS Notice 2007-7, Section IX, for additional information on QCDs.)
2012 QCDs Made in January 2013 — An IRA owner can treat a contribution made to a qualified charity in January 2013 as a 2012 QCD in either of the following circumstances:
- The contribution is a cash contribution to the charity of all or a portion of an IRA distribution made to the IRA owner in December 2012, provided that the contribution would have been a 2012 QCD if it had been paid directly from the IRA to the charity in 2012.
- The contribution is paid directly from the IRA to the charity, provided that the contribution would have been a 2012 QCD if it had been paid in 2012.
IRA owners should keep records to substantiate the timing of contributions and distributions regarding any 2012 QCD made in January 2013.
A QCD made in January 2013 that is treated as a 2012 QCD will satisfy the IRA owner’s unmade 2012 RMD if the amount of the QCD equals or exceeds the 2012 RMD. However, no part of such a QCD can be used to satisfy the 2013 RMD, even if the 2012 RMD had already been made. In determining the RMD for 2013, the 2012 QCD must be subtracted from the December 31, 2012, IRA account balance(s).
For additional details or clarification on these rules, contact us at 559.924.1225.
