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Tax Increase Prevention Act of 2014

December 24, 2014  |  Brandon C. Gromada Head & Neck Cancer Foundation, IRA holder or beneficiary, President Obama, QCD, Qualified Charity, Tax Increase Prevention Act of 2014

The Tax Increase Prevention Act of 2014 signed by President Obama on December 19, 2014 allows IRA owners who are at least 70½ years old to give up to $100,000 directly from an IRA to a charity without having to include the distribution in taxable income for the 2014 tax year. The provision is retroactive to January 1, 2014, and expires December 31, so decisions must be made quickly.

Donating IRA funds directly to qualified charities allows the IRA holder or beneficiary to avoid taking possession of the funds and the tax bill that comes with them. It also allows the extra income to be excluded from tax formulas for Medicare premiums or for the Pease limitation on itemized deductions.

In brief, a qualified charitable distribution (QCD) from an IRA can be made only by an IRA owner or beneficiary age 70½ or older, and can total up to $100,000. A spouse age 70½ with an IRA could give up to $100,000 as well. A QCD can be used to meet your required minimum distribution. The funds, which cannot come from active SEP or SIMPLE IRAs, must be sent directly to the qualified (IRS-approved) charitable organization.