There are very few opportunities to conduct tax planning for 2012 once the calendar year flips to 2013.  However, a unique, very limited opportunity is available for the 2012 tax year.  One of the provisions of the recently passed American Taxpayer Relief Act of 2012 was the reinstatement of the Qualified Charitable Distribution (QCD) from an IRA to a charity.  To be eligible for QCD treatment and count toward an owner’s required minimum distribution (RMD) obligation for the year:

  • You must transfer funds directly from your IRA to a charity
  • Distributions must be made from an IRA account (not another retirement plan like a 401(k))
  • The IRA owner must be 70 ½ years of age or older on the date of the donation from the IRA to the charity.
  • The limitation per person in a single year is $100,000
  • The donation must be to a public charity (most private foundations, CRATs, CLATs and some other entities do not qualify)

Many of you may now be asking the question, “How can I do this now when the year-end has already passed and I have received my RMD for 2012?”  Congress added special “look-back” provisions for the QCD since the legislation did not pass until January 1, 2013.  There are two options available:  one option is to elect to have a QCD made in January of 2013 count as if it was made on December 31, 2012, and option two is to re-characterize a distribution made in the month of December 2012 as a QCD as long as the same amount is donated to a qualified charitable organization by January 31, 2013.

The second question many of you may ask at this point is “why would this be worthwhile?”  IRA owners are required to take required minimum distributions out of their IRA once the taxpayer turns 70 ½ years of age.  In some instances, a taxpayer may not be able to realize the full benefit of a charitable contribution.  For instance, their income may be so low that they don’t exceed the standard deduction threshold (i.e. not able to itemize), or their charitable contributions may be so high in a year that they exceed the charitable contribution limits.  In these situations a QCD will enable them to “circumvent” thresholds to obtain the full taxable deduction for their contribution.

If you are interested in using this planning strategy for 2012, please contact Marie Holliday at (302) 691-2211 or

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