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Charitable Deductions made in 2012 are still possible

By: Chuck Strauss

January 28, 2013

If you own an Individual Retirement Account (IRA),there are still a few days left for you to make a tax-free transfer to eligible charities and have it count as a tax deduction for tax-year 2012.

IRA owners age 70 or older have until Thursday, January 31, 2013 to make a direct transfer, or alternatively, if they received IRA distributions during December 2012, to contribute, in cash, part or all of the amounts received to an eligible charity.

The American Taxpayer Relief Act (ATRA) has extended for 2012 and 2013 the provision authorizing qualified charitable distributions (QCDs) otherwise taxable distributions-- from an IRA owned by someone 70 or older, paid 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 and now is effective again.

Normally, a charitable deduction can be taken only when a taxpayer itemizes with a Schedule A. However, The QCD option is available regardless of whether an eligible IRA owner itemizes deductions.  Transferred amounts are not taxable and no deduction is available for the transfer. Note that 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. (Source: IR-2013-6)

The QCDs are reported in the Form 1040 at line 15b.  Click here to access more details.