In two earlier blog posts we mentioned that the House had passed one bill to extend a number of tax breaks and had passed another bill, the ABLE Act, which would provide added benefits to individuals with disabilities.
Tax Extenders Bill:
The good news is that the bill was signed into law on December 19, 2014. Among the extensions is the tax break for charitable contributions made directly from an IRA, also known as Qualified Charitable Distributions (“QCDs”). This option provides individuals with a nice alternative to donating to a charity. Again, the tax break allows an IRA owner to transfer $100,000 annually to a charitable organization without incurring any income tax. The IRA owner must be age 70 ½ or older and the funds must be distributed directly to the charity. The QCD satisfies the IRA owner’s minimum distribution requirements, so rather than picking up additional income, the charitably inclined IRA owner may consider transferring those funds directly to a charity. The bad news is that Congress decided against a 2 year extension. Therefore, the QCD extension expires at the end of 2014, leaving taxpayers with a VERY short window to consult with their attorneys and accountants as to their IRA charitable planning.
President Obama, the same day, also signed into law the ABLE Act, which was overwhelmingly approved by Congress. The Act presents a major planning opportunity for middle income parents who want to provide for a disabled child over time. Unlike 529 savings plans, funds in an ABLE account are not limited to education. The Act will also present disabled individuals with greater opportunities to work without losing means-based benefits. Now that the Act has been approved by the President, each State will be responsible for adopting its own ABLE program.
Note: This article was originally published on December 19th and has since been updated to reflect the President signing the Tax Extenders Bill and ABLE Act.