By Elizabeth Spillotro
Among the many aspects of the tax reform compromise President Obama negotiated with Republican leadership in late 2010 is an extension of the qualified charitable distribution from retirement plans for 2010 and 2011. A QCD is a direct transfer of property (up to $100,000 for an individual, $200,000 for a married couple filing jointly) from most conventional IRA accounts to charity. The distribution is not recognized as income taxable to the donor, and does not qualify for a charitable deduction.
Why is this so exciting? For donors over age 70 ½, the QCD can count toward the IRA owner or beneficiary's required minimum distribution – meaning a donor who does not need the required distribution from her IRA can instead redirect some or all of that distribution to charity and avoid incurring the income tax that results from accepting the distribution herself. It also means the owner of an exceptionally large IRA can reduce its size and taxable implications (estate and income) by redirecting some of its assets directly to charity.
A donor who makes a QCD before January 31, 2011 can elect to have that distribution as made on December 31, 2010 for tax purposes. Accordingly, if it would benefit your 2010 tax bill to make a qualified charitable distribution, act fast!