On December 3, 2014, the House of Representatives passed legislation that would extend a number of tax breaks for the 2014 tax year. Senate approval of the bill is likely. Please click here to view a summary of the Bill (H.R. 5771).
Among the tax break 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.
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 also may be used to satisfy the required minimum distribution for the year.
QCDs may not be made to donor advised funds or to supporting organizations and may not be made from employer-sponsored retirement plans. Although QCDs may be distributed to a charity tax free, they generally do not provide the donor with a charitable deduction.
The planning window for this opportunity is currently limited since the extension only applies for the 2014 tax year and the Senate has not yet approved the Bill.