The Protecting Americans From Tax Hikes (PATH) Act of 2015 was passed on December 18, 2015. That bill now makes the IRA Charitable Rollover permanent.
This is very good news for donors, who can plan with certainty to help their favorite charities through an IRA gift. Because the IRA rollover gift is not reported in taxable income, it is a very convenient way to help Coyote Hill while also simplifying your tax return by reducing your adjusted gross income.
Here are the basics. IRA owners who are over age 70½ are required to take a minimum distribution each year. In nearly all cases, this distribution from a traditional IRA produces ordinary income for the recipient. However, a “qualified charitable distribution” (QCD) is now permitted for transfers of up to $100,000 per year from IRA owners over age 70½ directly to a qualified charity like Coyote Hill.
The QCD may be used to fulfill the required minimum distribution (RMD) for the year of the transfer. Because the QCD is not included in taxable income, there is no reported charitable deduction. However, transferring the QCD amount directly to charity rather than taking a distribution and writing a check to charity results in a lower adjusted gross income (AGI). This may save both ordinary tax AND alternative minimum tax.
Call our office at 573.874.0179 to learn more about how you can redirect unneeded IRA income to Coyote Hill!