As the end of the year approaches, individuals over the age of 70½ are considering their Required Minimum Distribution (RMD) from Individual Retirement Accounts (IRAs). Some of those individuals are asking about the Qualified Charitable Distribution (QCD) option (also called a Charitable Rollover). For now at least, the QCD is not an option for 2015.
Since funds in an IRA were contributed tax-free, the IRS requires you to start taking withdrawals at age 70½so the funds do not stay in the account indefinitely. Your RMD is the minimum amount you must withdraw from your account each year, calculated based on your account balance and life expectancy. The IRS website has more of the specifics for calculating the RMD and the required beginning date.
In prior years, starting in 2006, Congress established a QCD, allowing IRA owners to directly transfer up to $100,000 from their IRA to a charity, tax-free, as part (or all) of their RMD for the year. A QCD is not taxed to the account holder as income, meaning less tax for the account owner, and a higher donation to the charity. The QCD expired at the end of 2007, but in most years since, Congress has extended the provision, typically one year at a time, but it has not yet been extended for 2015.
Last year, the provision wasn’t extended to cover 2014 until the middle of December 2014, but was made retroactive to all qualifying charitable rollovers made during the year. It is only the beginning of November, so there is still time for the provision to be extended, only time will tell..
If it does get extended, typically it is extended retroactively. Thus, if you make the distribution now, and follow the appropriate procedures, it is possible Congress will act later this year to extend the provision and your prior distribution may qualify.