Making Charitable Contributions From Your IRA

With the passage of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (Tax Act 2010 or 2010 Tax Act), Congress retroactively reinstated the ability to make direct qualified charitable distributions (QCDs) from your IRA, in amounts up to $100,000 by IRA owners who are at least age 70½ years of age.

This provision expired at the end of 2009, but is once again available, retroactive to January 1, 2010, through December 31, 2011.

The provision allows the individual, age 70½ and thus subject to Required Minimum Distributions (RMDs), to make contributions directly from an IRA to a Qualified Charity, in an amount of up to $100,000 per year.  Since the 2010 Tax Act was passed so late in the year, there is a special provision for 2010 only, which allows the IRA owner to make such a QCD for the 2010 tax year as late as January 31, 2011.

QCDs can be used to satisfy the RMD requirement for the IRA owner, and the special provision allows the IRA owner to make such a distribution during January 2011 and elect to count this distribution toward his or her 2010 RMD.

This means that the IRA owner who doesn’t need his or her RMD for income can direct the distribution to the charity of his or her choice.  In addition, he or she will not have to recognize the distribution as income for determining Adjusted Gross Income (AGI) or any modified AGI calculations.

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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14 Comments

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  • Ken –

    The 1099R will not show anything different about your QCD. It will be included in the rest of your withdrawals from the account. You need to keep good records in order to get the correct amounts in your box 15a & 15b of the 1040 return.

    Hope this helps –

    jb

  • That’s a great question, LM – I suspect that the IRS will make some changes to Form 8606 to reflect those RMDs that were taken out after 12/31/2010 so that your RMD for 2011 is accurate.

    I will post more information when I find out something definitive.

    In the meantime, I’d suggest using the 12/31/2010 figure as your starting point for 2011 RMDs, to be conservative.

    jb

  • I did my 2010 RMD of $10,220 on January 15, 2011 directly to a qualified charitable organization. How does this impact my RMD amount for 2011 since the $10,220 was in the account on 12/31/2010?

  • Jill – you shouldn’t have to paper file, just enter the amount of your total distribution on line 15a, and if the entire amount was for QCD then enter zero on 15b – or if some portion of the distributions for the year was not QCD, enter that amount on 15b. And keep good records, in case the distribution is ever questioned.

    jb

  • Brandi – I have since learned that you do not have the 60 day window after December 31 for re-contributing your RMD.

    Sorry about the confusion.

    jb

  • When I did this previously, all I got from the broker was the tax form lumping all my rmd together with box “taxable amount undetermined” checked. Does this mean I have to paper file instead of file electronically to provide proof of the portion of my rmd that went directly to a charitable organization?

  • Possibly, if it has been less than 60 days since you took the RMD distribution. If not, then you are stuck with it, although you could make a charitable contribution of the amount you took out in RMD, and then deduct it on your Schedule A.

    Good luck with it…

    jb

  • If you’ve already pulled out your RMD to yourself for 2010 in 2010, can you “pay it back” in January, 2011 and then make a QCD in January, 2011 for 2010?

  • While you might be able to do this (I haven’t seen any documentation that says you *can’t*) – I’d suggest making two separate contributions, possibly even on two separate days, in order to not confuse matters.

    FYI – if you’re married, your spouse could make a QCD from her account for 2010 before 1/31 as well, as long as she’s also independently qualified.

    Best wishes –

    jb

  • I have sent in my RMD forms requesting charitable donations from my IRA at Key Direct. My RMD includes accounts from other banks, too. I have done this before, but they are saying it is different this year, and I may have to be penalized. Is the law different this year?

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