IRA QCD CONDITIONS
On December 17, 2015, the House of Representatives passed the Protecting Americans from Tax Hikes (PATH) Act. It extended or made permanent several expiring tax credits. On December 18, 2015, the House of Representatives passed legislation funding the government for the full 2016 fiscal year and the Senate passed H.R. 2029, which combined the PATH Act and the Consolidated Appropriations Act of 2016. President Obama signed H.R. 2029 into law on December 18, 2015. The PATH Act permits taxpayers over 70½ to make a contribution of up to $100,000 directly to a qualified 501(c)(3) charitable organization from their IRA each year. The PCA Foundation is qualified to receive QCDs from your IRA.
A QCD is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity. An IRA owner can exclude from gross income up to $100,000 of a QCD made for a year, and a QCD can be used to satisfy any IRA required minimum distributions (RMDs) for the year. Also, the amount of a QCD excluded from gross income is not taken into account in determining any deduction for charitable contributions.
There are several conditions that must be met:
- You must be at least 70½.
- Contributions must be made only to 170(b)(1)(A) organizations, which are “public” (50%) foundations and 501(c)(3) charities. However, the PATH Act excludes making QCDs to donor-advised funds (such as the PCAF’s Advise & Consult Fund® accounts and Increase Fund accounts), supporting organizations and private (30%) foundations (except for conduit foundations and private operating foundations). This is clearly something you will need to review with both the PCA Foundation and your tax advisor before having any checks sent to the PCA Foundation.
- This only applies to contributions that would otherwise completely qualify for the charitable deduction. This excludes gift annuities, charitable remainder trusts, etc.; the idea is that there can be no benefit to you from the charity, other than their appreciation.
- The contribution must otherwise have been considered taxable income.
- Payment must be made directly from your IRA trustee to the charity (although it is OK if you deliver the check yourself). If the check is payable to you, then it becomes taxable income, and you will be left declaring the income and taking a normal charitable deduction.
- You can take the distribution from any IRA except a SEP or Simple IRA that is still active (receiving contributions). You cannot take it from any employer plans (401k, 403b, etc.)
- You cannot also take a charitable deduction for the QCD.
- The QCD cannot be a split interest gift.