Qualified Charitable Distribution

Many people are familiar with or have used the Qualified Charitable Distribution (QCD). It enables a person over 70 1/2 years old to make a direct payment to a charity from his or her IRA with no tax consequences. Without the QCD feature, if you take money out of an IRA and donate it to a charity, you have to pay tax on the withdrawal, but you are not guaranteed to get a deduction for the full amount of the donation. This is especially true for someone who does not usually itemize deductions. Various other factors can enter in to raise your tax despite the fact that all the money went directly to a charity. With the QCD, if the money is paid directly out to the charity by the IRA and never touches the taxpayer's hands, there is no effect on income tax.

The QCD has been in effect for a few years, but it is scheduled to expire at the end of this year. It was supposed to expire last year, but Congress renewed it at the last minute, and gave people till the end of January, 2011, to do a QCD for 2010. No one knows (probably not even Congress at the moment) if it will be renewed again.