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Tax-Free Transfers to Charity Renewed for IRA Owners 70½ or Older

Posted 8:21 PM by

Transfers in January 2013 Can Still Count for 2012

Certain owners of individual retirement accounts (IRAs) have until Jan. 31, 2013, to make tax-free transfers to eligible charities and have them count for tax year 2012.

The American Taxpayer Relief Act of 2012 - enacted Jan. 2, 2013 - extended for 2012 and 2013 the provision authorizing qualified charitable distributions (QCDs), which are transfers from an IRA owned by someone age 70½ or older, directly to an eligible charitable organization. Each year, the IRA owner can exclude from gross income up to $100,000 of these QCDs. This provision had expired at the end of 2011.

The QCD option is available regardless of whether an eligible IRA owner itemizes deductions on Schedule A. Transferred amounts are not taxable and no deduction is allowed for the transfer. However, Indiana has an add back for this transfer; thus, it is taxable for Indiana residents. QCDs are counted in determining whether the IRA owner has met his or her IRA required minimum distributions for the year.

For tax year 2012 only, IRA owners can choose to report QCDs made in January 2013 as if they occurred in 2012. In addition, IRA owners who received IRA distributions during December 2012 can contribute, in cash, part or all of the amounts distributed to eligible charities during January 2013 and have them count as 2012 QCDs.