For those of you who waited until the very end to take all or any of your IRA required minimum distributions for 2015 and have outstanding charitable pledges, Congress and the President have given you the perfect gift. On December 18, 2015, President Obama signed into law the “Protecting Americans from Tax Hikes Act of 2015” (the “Act”). The Act extends a number of tax provisions that expired on December 31, 2014 and makes some of the extensions permanent. The Act is voluminous with many specialized tax provisions. The one that is most relevant to you is the permanent extension of the provision under Internal Revenue Code Section 408 allowing certain individuals to make tax-free charitable distributions from IRAs.

As a general rule, distributions from an IRA constitute ordinary income to you when you take a distribution. However, under the Act, individuals 70-1/2 and older may make tax-free distributions from their IRAs of up to $100,000 each year for charitable purposes. The distribution can be directed to be paid to the charitable organization without having to include the amount as income. Of course, there is no charitable income tax deduction for the payment to the charity, but not having to include the distribution as income is generally a better tax result than income inclusion and deduction.

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