Section 208 of the American Taxpayer Relief Act of 2012, (P.L. 112-240) (the Act), enacted Jan. 2, 2013, extended application of Internal Revenue Code section 408(d)(8), reauthorizing qualified charitable distributions (QCDs) made during 2012 and 2013. Here are some QCD examples to help navigate those rules.
Pre-Act QCD Made
An individual retirement account creator made an IRA distribution payable to a charity that would have qualified as a QCD, but for the absence of legislation extending the availability of QCDs after Dec. 31 2011. Pre-Act QCDs made at any time during 2012 now qualify. Some wrote $100,000 in checks from their IRAs directly to qualifying charities during 2012, just in case Congress would retroactively extend QCDs. Because Congress did so, those checks qualify as 2012 QCDs.
Contributions Made After RMD Withdrawal
An IRA creator-taxpayer withdrew $100,000 of 2012’s required minimum distribution in December 2012; he made $100,000 of charitable contributions in December 2012 after the IRA withdrawal. He may designate up to $100,000 of December 2012 QCDs as 2012 QCDs made out of the 2012 RMD. In addition, all of 2013’s $100,000 QCD is available.
Contribution Made After IRA Withdrawal
An IRA creator made $100,000 of 2012 IRA withdrawals during December 2012. He made $100,000 of charitable contributions in January 2013. The January contribution can be treated as a 2012 QCD out of those December 2012 withdrawals. In addition, all of 2013’s $100,000 QCD limit is available.
Automatic Withdrawals Made
An IRA creator and IRA custodian agreed to automatic quarterly withdrawals totaling the 2012 RMD. The last quarterly RMD was made during December 2012. The IRA creator may, by January 31, 2013, make a cash contribution of up to $100,000 out of the December 2012 quarterly distribution. That amount will be treated as a QCD.
Effect of DOMA
Each of two spouses wishes to make a 2013 QCD. Each has a $100,000 limit; the limit applies to individuals and isn’t affected by marriage. This means the federal Defense of Marriage Act doesn’t affect their QCDs. .
RMD Not Taken in 2012
A taxpayer didn’t take $100,000 of 2012’s RMD before Dec. 31, 2012. During January 2013, he can designate up to $100,000 in charitable contributions as 2012 QCDs. In addition, all of 2013’s $100,000 QCD limit is available.
2013 Withdrawal Made in January
A taxpayer withdrew $100,000 of 2013’s RMD in January 2013. Charitable contributions made before the withdrawal occurred may not be designated as QCDs. Nor may January 2013 contributions made after the withdrawal occurred. But all of 2013’s $100,000 QCD limit is still available for future use any time during 2013.
These are just a few examples, check out a more comprehensive list right here. If you need help handling your donations or have any other IRA related questions, feel free to contact the tax experts at the IRA Financial Group today!