Required Minimum Distribution charitable tax break (QCD) is permanent

If you're required to take a minimum distribution (RMD) from your IRA starting at age 70-1/2, you have the option to make that distribution tax free from Federal or Oregon taxes by directing some of it to the charity of your choice as a Qualified Charitable Distrition (QCD)..

In understanding qualified distributions, it's helpful to recall the basics of required minimum distributions (RMDs): If you're age 70½ or older, you generally must withdraw a minimum amount each year from your traditional IRAs.The money you're required to withdraw gets added to your taxable income. Failure to take your RMD by year-end could result in a stiff IRS penalty—50% of the amount you should have withdrawn.

Under the QCD rule, beginning at age 70½, you can have all or part of your distribution made directly from your IRA to a qualified charity (up to $100,000 per taxpayer, per year). Unlike conventional RMDs, QCDs aren't subject to ordinary federal or state income taxes. You can give your RMD to charity anytime during the year now that the tax break is permanent.

You need to transfer the money directly from the IRA to the charity for it to count as the tax-free transfer. Ask your IRA administrator and the charity about making a direct transfer, or you can have the IRA administrator send a check from your account to the charity. If you have check-writing privileges for your IRA, you can write a check to the charity. Give us a heads-up, so we know the contribution came from you and can send you an acknowledgement.

For example, suppose that in 2015 you're over age 70½ and you'd like to make a contribution to your favorite charitable organization. You may have your RMD made payable directly to the Lincoln City Cultural Center, and then designate it as a qualified charitable distribution on your tax return. You'll have satisfied that amount of your distribution requirement, and you won't have to pay income taxes on that money. Be sure to take those QCDs to your tax preparer to be sure it is recorded properly on your returns so that counts toward meeting your RMD for the year but is not counted as income.

Be aware that you can't also claim the qualified distribution as a charitable tax deduction—the amount is simply excluded from your taxable income.

So which is better: the tax-free transfer or the charitable deduction?

If you make a tax-free transfer from your IRA to charity, you can’t also deduct that money as a charitable contribution. But the tax-free transfer could give you extra benefits. You don’t need to itemize your deductions to get a tax benefit from the gift (and many people who no longer have a mortgage don’t itemize their deductions). Making the tax-free transfer also keeps the money out of your adjusted gross income. That could help you avoid the Medicare high-income surcharge, which boosts your Part B and Part D premiums if your AGI is more than $85,000 if single or $170,000 if married filing jointly. Keeping the money out of your AGI could also make less of your Social Security .benefits taxable

Check with your own tax advisor about the impact on your personal tax situation.