On December 18, 2015 President Obama completed the federal government’s Christmas gift to U.S. tax payers by signing the Protecting Americans from Tax Hikes (PATH) Act of 2015. The PATH Act extended, many permanently, several temporary tax breaks that expired at the end of 2014 and made them retroactive to January 1, 2015. It will finally end much of the uncertainty taxpayers have experienced in the past over various tax provisions and provide predictable tax savings for years to come.
Included among the tax breaks is the provision for Qualified Charitable Distributions (QCDs) that allows those over age 70-1/2 to make up to $100,000 of direct gifts from their traditional Individual Retirement Accounts (IRAs) to one or more charities each year. A married couple can contribute up to $200,000 if each spouse has their own IRA and is at least 70-1/2. Distributions can be made without having to include them in the donor’s taxable income and they satisfy the annual Required Minimum Distribution (RMD) applicable after age 70-1/2. This provides a unique opportunity to fund charitable giving, while realizing greater tax savings.
We will provide additional information regarding the above act in the near future, as there are several other “temporary” tax breaks that were extended or made permanent by the PATH Act. However, the time sensitivity of the QCD rules seems particularly urgent and therefore, we wanted to get this information out right away. If you would like assistance determining how the QCD rules or other tax breaks apply to you, please do not hesitate to call us. We look forward to helping you take advantage of the predictable tax savings in the years ahead.