Charitable Contributions From Your IRA in 2010 and 2011

With the passage of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (Tax Act 2010 or 2010 Tax Act), Congress retroactively reinstated the ability to make direct qualified charitable distributions (QCDs) from your IRA, in amounts up to $100,000 by IRA owners who are at least age 70½ years of age.

This provision expired at the end of 2009, but is once again available, retroactive to January 1, 2010, through December 31, 2011.

The provision allows the individual, age 70½ and thus subject to Required Minimum Distributions (RMDs), to make contributions directly from an IRA to a Qualified Charity, in an amount of up to $100,000 per year.  Since the 2010 Tax Act was passed so late in the year, there is a special provision for 2010 only, which allows the IRA owner to make such a QCD for the 2010 tax year as late as January 31, 2011.

QCDs can be used to satisfy the RMD requirement for the IRA owner, and the special provision allows the IRA owner to make such a distribution during January 2011 and elect to count this distribution toward his or her 2010 RMD.

This means that the IRA owner who doesn’t need his or her RMD for income can direct the distribution to the charity of his or her choice.  In addition, he or she will not have to recognize the distribution as income for determining Adjusted Gross Income (AGI) or any modified AGI calculations.

fyi – you can find the technical explanation at jct.gov – in the document JCX-55-10.

Photo by Wikimedia