Tax Free IRA Transfers to Charity Deadline is January 31

Time is running short to take advantage of tax free IRA transfers to charity for 2012.  The American Taxpayer Relief Act of 2012 enacted on January 2, 2013 extended the authorization of qualified charitable distributions (QCD) from IRAs for 2012 and 2013.  IRA owners aged 70½ or older can have otherwise taxable distributions of up to $100,000 paid directly to an eligible charitable organization.  A QCD can be made to satisfy any required minimum distributions for the year.  This opportunity first became available in 2006, but had expired in 2011.  Some of the requirements are as follows:

  • Restricted to IRAs
  • $100,000 per person limit
  • The IRA owner must be at least 70½ on the day of the transfer
  • The distribution will only qualify to the extent that it would have been includible in gross income
  • The distribution must qualify under the general charitable deduction rules
  • The transfer must be a direct transfer from the IRA to the charity

Because the QCD authorization was not extended until January 2, 2013, special rules are in place for 2012 QCDs.  An IRA owner can treat a QCD made in January 2013 as a 2012 QCD in the following situations:

  • The QCD is paid directly from the IRA to the charity by January 31, 2013; or
  • The QCD is a cash contribution to the charity of all or a portion of an IRA distribution made to the IRA owner in December 2012.

In either case, the QCD must have otherwise qualified as a 2012 QCD if it had been paid directly from the IRA to the charity in 2012.  Remember, good record keeping will be important to substantiate the timing of the QCD.