A QCD (Qualified Charitable Distribution) is an otherwise taxable distribution from an IRA (excluding active SEP and SIMPLE) owned by an individual who is age 70.5 or over that is paid directly from the IRA to a qualified charity.
Can I make a QCD?
Many IRAs are eligible for QCDs – Traditional, Rollover, Inherited, inactive SEP, and inactive SIMPLE. Listed below are the requirements to make a QCD from one of these plans.
- You must be 70.5 or older to be eligible to make a QCD.
- You are not required to itemize deductions to make a QCD.
- The maximum annual amount that can qualify for a QCD is $100,000.
- For a QCD to count towards your current year’s RMD (Required Minimum Distribution), the funds must come out of your IRA by your RMD deadline, generally December 31.
- Any amount donated above your RMD does not count toward satisfying a future year’s RMD.
- Funds distributed directly to you, the IRA owner, and then donated by you to charity do not qualify as a QCD.
What charities qualify?
The charity must be a 501(c)(3) organization, eligible to receive tax-deductible contributions. The IRS has a search tool for tax exempt organizations here:
https://www.irs.gov/charities-non-profits/search-for-tax-exempt-organizations
How do I set up a QCD?
You’ll need to contact your retirement plan account holder. This can usually be done by telephone, USPS, or electronically through your on-line account.
How do I report a QCD on my tax return?
The QCD is reported as a normal distribution on IRS form 1099-R. The taxable portion of your distribution is then carried over to your personal 1040. Below is an example of a taxpayer who chose to make a $7,500 qualifying charitable distribution. This example shows a total distribution of $21,200 and only $13,700 of it being taxable.
This material is compiled from sources SST believes to be reliable. The possibility of error does exist. The material is intended only as educational and may omit information on exceptions, qualifications, definitions, and effective dates. The reader should not rely solely on this material but should review original sources to determine the law and applicability for each situation. Neither the author nor Solid State Tax Service, LLC will be responsible for any error, omission, or inaccuracy under any circumstance.