Charity Parity Act Would Expand Availability of the QCD Option

A recently released bill, titled the Charity Parity Act, would modify the rules governing qualified charitable distributions (QCDs) to allow taxpayers to make QCDs directly from 401(k)s. Under the current rules, QCDs are only available if they are transferred from the taxpayer's IRA to a qualifying charity. Currently, taxpayers who are at least 70.5 years old can transfer up to $111,000 from their IRAs to a charity. The QCD offsets the taxpayer's taxable required minimum distribution (RMD) for the year--allowing the taxpayer to reduce their overall tax liability instead of taking a tax deduction for the donation. Because donations from 401(k)s are currently not eligible for QCD treatment, taxpayers who wish to take advantage of the strategy must first roll the 401(k) funds into an independently-established IRA. For more information on the rules governing QCDs, visit Tax Facts Online. Read More: Link to Q3997.