Counting on a Change in the QCD Provision?
By Diana Batchelor
Your first question may be: What is a QCD? A Qualified Charitable Donation allows one to donate a part of his or her required minimum distribution (RMD) from their IRA directly to a qualified charity. Remember, the RMD is the amount you must distribute from your IRA at age 70½. The maximum allowable amount of a QCD is the total of your RMD or $100,000, whichever is less. If you are not required to take an RMD, then you cannot take advantage of a QCD. The QCD option is great for clients who are charitably inclined, as the QCD portion of their RMD will not be considered a taxable distribution. Previously, the QCD provision was approved by Congress annually. This past summer, the House Ways and Means Committee has passed a proposal (H.R. 416) to amend the tax code to make charitable contributions from IRAs tax-deductible, not subject to annual approval. The Permanent IRA Charitable Contribution Act of 2014 is currently on the calendar to be considered by the House for approval.
If you have any hope that Congress is going to pass the Permanent IRA Charitable Contribution Act of 2014, Lifetime Wealth would suggest that you hold back the amount of the taxes to be paid on your RMD until December 15, 2014. If Congress passes H.R. 416, then you will have less of a tax liability for your RMD, and Lifetime Wealth can request the QCD and subsequent taxes to be paid before December 31, 2014. A separate form is needed to facilitate a QCD requiring your signature; the name of the qualified charitable organization; its address, phone number, and responsible person; and the amount of donation.
If you are considering a QCD, please contact Lifetime Wealth so we can discuss with you the tax implications and what amount you may need to hold back from your RMD in the event the Permanent IRA Charitable Contribution Act is passed. Lifetime Wealth will also draft a letter, which is required by TD Ameritrade, stating the donor must retain a copy of the letter recognizing that TD Ameritrade will not be providing separate and independent accounting of said donation. It is the responsibility of the donor to deduct the amount of the donation from the 1099R provided by TD Ameritrade in respect to the taxable amount for the relevant account.