The Charitable IRA gift is likely to be the gift of choice going forward for many American 70½ and older. “Going forward” means in the wake of the 2017 tax law changes.

One doesn’t need to itemize deductions to save taxes via a Charitable IRA gift (called a “qualified charitable distribution,” or QCD) … given that the QCD isn’t taxed to the donor, and also that the donor avoids having to take a required minimum distribution from the IRA to the extent of the QCD.

There are some problems with the QCD, however. Some examples:

The feds don’t tax the QCD to the donor, but New Jersey does.

The IRS hasn’t issued guidance on when the QCD is complete for federal income tax purposes. For example, lots of IRA custodians make the QCD check payable to a charity but mail the check to the donor … requiring the donor to send the check to the charity. IRS has said this is OK but hasn’t said when the QCD is deemed to be made.

In 2017, one IRA custodian made a check payable to the donor. The donor then proposed completing a QCD by endorsing the check over to a charity. Didn’t work. The check was income to the donor.

IRA check-writing privileges also can cause problems. For example, in December 2017, a donor wrote a check on his IRA account made payable to a charity. The donor hand-delivered the check to the charity also in December 2017. The charity didn’t deposit the check until January 2018, however, because it was short-staffed due to the year-end holidays. This one should be OK, should be a 2017 QCD; but the IRA custodian is going to report it as a 2018 transaction, because that’s all the information the custodian has.

If your organization is going to promote Charitable IRA gifts this year, which may be great idea, it should start doing so well before year-end.

For professional advice on how to market this way of giving, contact your Sharpe Group representative.

By Jon Tidd, Esq