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Qualified Charitable Contributions From Your IRA in 2012 and 2013

Cliff Clavin

With the passage of the American Taxpayer Relief Act of 2012, the provision for Qualified Charitable Contributions (QCD) from an IRA has been extended to the end of calendar year 2013.

Great news, right?  But what does that mean?  Can you make a QCD for 2012?

As you know, the QCD provision is limited to taxpayers who are over age 70½ and thus subject to Required Minimum Distributions (RMD).  In addition, the QCD must normally be sent directly from your IRA custodian to the qualified charity – it can’t be taken in cash and then sent to the charity.  If you qualify and you do the distribution correctly, you will not have to include the distribution on your tax return as income.  You also would not count the charitable contribution as an itemized deduction.

If you happened to send a distribution directly to a charity from your IRA during 2012, it will be treated as a QCD.  This probably didn’t happen in very many circumstances since the QCD provision was not available until passage of the law on January 1, 2013.

Special Provision for 2012

For 2012 distributions there is a special provision:  if you made a distribution in cash during December 2012, you have until the end of January 2013 to send a contribution in any amount up to $100,000, limited by the amount of your distribution during December 2012. You can then treat this contribution as if you had sent it directly to the charity – don’t count it as income, and don’t itemize the contribution.  This distribution could have been your required distribution for the tax year 2012.

If you were waiting on the fiscal cliffhanger, you can still make a Qualified Charitable Distribution during January 2013 – directly from your IRA to the charity – and count it as if the QCD occurred in December 2012.

For 2013

For 2013, the QCD is available through the end of the year under normal rules.  This means that you can, if you’re age 70½ or older, make direct distributions from your IRA to a qualified charity or charities, not counting the distribution as income and not itemizing the charitable contribution.

23 Comments

  1. Vee ButterfieldNo Gravatar says:

    Thanks for this very useful site. I have a couple of questions.

    I will be 70 1/2 on March 24, 2013. I will start taking the RMD from my several IRA accounts this year. I want to donate part of the RMD to my Church (a qualified charity). Do I need to wait until after March 24, 2013 to do the contribution (date I am 70 1/2)?

    Part of my IRA is invested in a deferred annuity. I’m not sure if I must annuitize it this year or if I can wait and annuitize it in a future year, since I can make the RMD from my other IRA accounts.

    Can a QCD be made from an annuity? Can I direct the annuity custodian (insurance Company) to send part of my annual annuity distribution to a qualified charity and avoid it adding to my adjusted gross income, and avoid income tax on the QCD? If this can be done, can I change the amount donated each year and have the balance of the annuity distribution come directly to me? Can’t find this anywhere on the Internet.

    Thank you,
    Vee

    1. jblankenshipNo Gravatar says:

      Hello Vee –

      I would wait until you are 70 1/2 before taking the distribution, just to be certain that it is counted as your RMD. I think you could do it any time in the year but this is the safe way to do it.

      Your annuity payment, since it’s in an IRA, can be used to make a QCD donation, either all or in part, that is entirely up to you. The only limit is that it can’t be more than $100,000.

      Regarding whether or not the annuity must be annuitized this year is a question for the annuity company. I suspect that it will be required.

      Hope this helps –

      jb

  2. ShirleyNo Gravatar says:

    What is a donor Advised Fund? Also could you define Cash contribtions?? I am assuming that these contributions can be made by check, online donations etc but want to assure that this will work if I choose to do it other than by check as seeing that the donation will go through a debit or credit card contribution as the agency I want to contribute to is across the country and not sure it would get there via mail.

    Shirley

  3. Sam HowellNo Gravatar says:

    What are the tax advantages of someone making a direct distribution from the IRA in January of 2013 and treating it as a 2012 distribution? I would assume that the January 2013 distribution would not fulfill the 2013 rmd requirements if it is treated as a 2012 distribution. Correct?

    1. jblankenshipNo Gravatar says:

      That’s correct, a QCD in January 2013 that is classified as occurring in 2012 cannot be counted as an RMD for 2013.

      The tax advantage to taking a QCD in January 2013 that counts in tax year 2012 includes that you can still do another QCD for 2013, with an additional $100k limit. Counting the distribution in 2012 will also reduce your RMD for 2013. There may be other advantages, but those are the first couple that come to mind.

      jb

      1. Sam HowellNo Gravatar says:

        Thanks Jim. I would also guess it allows someone that did not make the RMD in 2012 an opportunity to get that done through the transition QCD option without incurring the possible penalty that could be imposed if the IRS did not waive it.

  4. FrankNo Gravatar says:

    I’m trying to understand what the difference between a distribution taken in December versus distributions taken January through November. Seems like Congress is rewarding procrastinators. Am I missing smething?

    1. jblankenshipNo Gravatar says:

      No Frank, I think you’re probably hitting the nail on the head. I thought that was a bit harsh myself, restricting the cash payments to only those distributions take in December. I guess you can take it up with your congressman!

      jb

  5. EdwardNo Gravatar says:

    Can a QCD be made to a private foundation?
    How about to a Donor Advised Fund?
    How about a private operating foundation?

    1. jblankenshipNo Gravatar says:

      Edward – The donee must be a qualified charity. If your choices you’ve mentioned are qualified charities, then yes you can direct your QCD to them. The IRS has a tool that provides you with information about charitable organizations – Exempt Organization Select Check.

      Hope this helps –

      jb

  6. E. Calvin MasseyNo Gravatar says:

    I sure do appreciate this information about the QCD for charity. Since I take the standard deduction and I made my QCD in cash in Dec. 2012, I will be able to deduct the amount I send to charity in Jan. 2013. and not pay taxes on it.

    Thank a lot (I was the one who pointed out the error in your article on Busines hoime deduction from $500 to $5.00 per square foot).

    I sure do want to subscribe to your newsletter.

    1. jblankenshipNo Gravatar says:

      Thanks again for pointing out that error, Calvin.

      And just to be clear, you aren’t deducting the charitable contribution in the traditional sense – you are reducing your reported income by the amount sent to the charity. The contribution to the charity doesn’t get deducted on Schedule A (Itemized Deductions), but rather on the front of your Form 1040, Line 15.

      jb

  7. William PackNo Gravatar says:

    Must the delayed charitable contribution for 2012, paid in January 2013, come directly from the IRA custodian or can the taxpayer take the funds from the IRA distribution and give it to the charitable organization?

    1. jblankenshipNo Gravatar says:

      William,

      If the distribution is taking place in 2013, it must go directly to the qualified charity from your IRA custodian. The cash payment option is for folks who took a distribution during December 2012 exclusively.

      Hope this helps!

      jb

  8. ShirleyNo Gravatar says:

    Can these QCD contributions be made to more than one agency? And can they be designated for more than one service or area where the agency. For instance Campus Crusade sends help to many areas and other agencies do the same thing such as World Concern, World Vision etc.

    Shirley

    1. jblankenshipNo Gravatar says:

      Hi Shirley –

      The only limit is on the amount – $100,000 per individual. There is no limit to the number of agencies that you can designate and direct your contributions toward.

      jb

      1. ShirleyNo Gravatar says:

        What about using funds from a Deferred Compensation Fund which I distributed in Dec 2012. I retired in March 2011 and split my distributions in Dec 2011 between 2011 & Aor 2012 and then had to take a distribution in Dec 2012. Wish I had known about this earlier and I could have avoided having my Medicare charges increase as I was not too far off the breaking point but went over it so I want to perhaps avoid that happening now seeing that we have that opportunity presently but I am not sure if the Charitable Donation applies to Deferred Compensation and might have to select a different account.

        Shirley

        1. jblankenshipNo Gravatar says:

          Shirley,

          Unfortunately, for the QCD treatment the funds must come from an IRA. No other retirement plan account is eligible for this treatment.

          jb

  9. PaulNo Gravatar says:

    What forms are required to report a IRA distribution in 2012 and gifted to a charity in January 2013 so the IRA distribution is not reported on the 2012 federal tax return? Thanks,

    1. jblankenshipNo Gravatar says:

      Paul, you only need to document that the distribution occurred in December of 2012 and the contribution occurred in January 2013. The charity should provide a receipt for the latter, and the former should be on your statement for December.

      When you receive the 1099R for 2012, it will include your distribution that was used in 2013 for a charitable contribution. Put the entire amount of the distribution on line 15A and then the net amount (minus the contribution) on line 15B.

      Hope this helps!

      jb

  10. Leslie SchocknerNo Gravatar says:

    I took an RMD from a beneficiary IRA in December 2012. Would this contribution be able to be considered to be non-reportable tax income if I then make a charitable contribution for an amount under the total I took? Could I offset charitable contributions I already made to the IRA distribution? Would it be pertinent that I used this RMD to pay withholding taxes to the state and feds?

    1. jblankenshipNo Gravatar says:

      Leslie, if you otherwise qualify (i.e., you are age 70 1/2 or older) this distribution in December could be wholly or partly contributed to a qualified charity and then excluded from your income for 2012. The contribution to the qualified charity must occur before the end of January.

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