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How Does the PATH Act Affect My Charitable Distributions?

March 18, 2016

Planning on donating to charity this tax season? New guidance might allow you to receive a valuable tax break.

The Protecting Americans from Tax Hikes (PATH) Act of 2015 provides an opportunity for charitably inclined taxpayers over the age of 70 1/2 to make generous contributions to their favorite charities (by making a qualified distribution from their IRA) and receive a tax break for doing so. Historically, taxpayers have had trouble taking advantage of this deduction because the provision expired several times but got reinstated at or near the end of the year, with a retroactive effective date. Thankfully the PATH Act makes the deduction permanent.

Clarifications for charitable distributions

The PATH Act makes clear that this break is permanent, and for eligible taxpayers this means:

  • The amount of the direct distributions to charity (up to the annual limit) is excluded from taxable income.
  • The distribution can help satisfy the taxpayer’s IRA required minimum distribution (RMD) for the year.

Are there any charities that aren’t qualified for the purposes of this break? Download our eBook, “2015 PATH Act: What All Taxpayers Need to Know” to find out.

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