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Year-end charitable gifting strategy–qualified charitable distributions

While the American Taxpayer Relief Act of 2012 (ATRA) may be largely a misnomer, a few provisions are beneficial to taxpayers. One such provision is the extension through this year of the qualified charitable distribution (QCD). This provision permits an IRA holder who is age 70½ or older to make a distribution from his or her IRA account directly to a public charity and exclude the distribution from gross income. Such a charitable distribution can be made in an amount up to $100,000 and satisfies any required minimum distribution for 2013. Since the amount of a QCD is excluded from gross income, it does not increase a taxpayer's adjusted gross income (AGI) and is not taken into account in determining any deduction for charitable contributions. The distribution may be taxable under state law unless the applicable state relies on federal AGI in computing state taxable income. A taxpayer making a QCD does not get a charitable deduction on his or her Form 1040, however. Under ATRA, this provision was only extended through the end of this year, and it is unknown whether Congress will move to reauthorize this favorable tax provision for 2014.