Monday, December 21, 2015


The Protecting Americans from Tax Hikes Act of 2015 (aka the PATH Act) made permanent the previous “tax extender” known as a Qualified Charitable Distribution (QCD).

A QCD allows IRA owners age 70½ and older to directly transfer up to $100,000 from an IRA account to a qualified charity, tax-free, as part (or all) of their Required Minimum Distribution (RMD) for the year.

Any portion of an RMD that represents a QCD is not included in gross taxable income reported on Line 15(b) “Taxable amount” of “IRA distributions”) on Page 1 of Form 1040.  If your total Required Minimum Distribution from your IRA investments for the year is $50,000, and you have made a QCD of $40,000, you only report $10,000 as a taxable distribution.  If the entire $50,000 was used as a QCD you have “0” taxable income to report.

By reducing the amount of the RMD that must be included in gross income you also reduce your Adjusted Gross Income (AGI), and, by doing so, you can also potentially reduce the taxable portion of Social Security or Railroad Retirement benefits and increase the multitude of deductions and credits that are reduced or phased out as AGI rises. 

You are not allowed to claim a charitable deduction for the amount of the QCD on Schedule A – the “deduction” has already been claimed by reducing the taxable portion of your RMD. 

If you have not already taken your RMD for 2015 you must do so by December 31, 2015 or you will be subject to a humungous 50% IRS penalty.  And if you have not already taken your RMD for 2015, you should seriously consider using some of the amount to make a Qualified Charitable Distribution to a church or charity.

Now that the idiots in Congress have made the QCD permanent we will no longer need to wait until the end of December each year to find out if this tax benefit is available.  It seems the idiots have done something right for a change (a true rarity indeed).

My standard final word of advice – before acting on anything you have read here contact your tax professional.



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