Q. I have a follow up inquiry regarding the recent columns about donations to charitable donations from an IRA. My understanding is that if you are 70 ½ you can still have money transferred directly from your IRA to a qualified charity and the money transferred is not considered in your taxable income. In other words, the change in the RMD (required minimum distribution) age to 72 did not affect the charitable contribution age of 70 ½. However, if you withdraw the money and then give it to a charity, the money is taxed normally.
A. Thank you for your follow up on this. As you indicate, contrary to what was stated in the prior column, the RMD change to age 72 did not have a corresponding change in the age applicable to the provisions regarding qualified charitable distributions. In the interest of clarifying this, I asked CPA Remy Tomchak to provide his input, which is set forth below.
Donations to a charitable organization from a traditional IRA are termed a qualified charitable distribution (or QCD). In a single tax year, the maximum total that can be excluded from gross income is $100,000 per individual IRA owner. Therefore, for married individuals filing a joint return, the maximum that can be excluded as a qualified charitable distribution is $200,000.
For the QCD to be qualified, the distributions must be made on or after the date the individual beneficiary of the IRA reaches age of 70 ½. The distribution must be made directly by the IRA trustee to a qualified charitable organization. Qualified charitable organizations do not include certain private foundations and donor advised funds.
The Setting Every Community Up for Retirement Enhancement Act (the SECURE Act) passed in December 2019 moved the required starting date for required minimum distributions to age 72, however, QCD’s may be made after the IRA owner has reached at least 70 ½ on the date of the distribution. Under the SECURE Act the excludable amount for a QCD continues to be $100,000 but because the SECURE Act removed the age limitation on IRA contributions this amount may be reduced if the taxpayer continues to make IRA contributions after age 70 ½. After 2019, the $100,000 is reduced by the aggregate amount of any IRA contributions claimed as a deduction for that year. If the IRA contains both deductible and nondeductible contributions, there are special rules that apply.
This is a joint column from guest contributor Remy Tomchak, CPA and from Robert E. Farnam, an attorney practicing in Idaho Falls. This column is provided by the 7th District Bar Association as a public service. Submit questions to “It’s the Law,” P.O. Box 50130, Idaho Falls, ID 83405, or by email to [email protected]. This column is for general information. Readers with specific legal questions should consult an attorney. A lawyer referral service is provided by calling the Idaho State Bar Association in Boise at 208-334-4500.
