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What is a Qualified Charitable Distribution?

A qualified charitable distribution (QCD) is a distribution of funds from your IRA (other than a SEP or SIMPLE IRA) directly by the trustee to a qualified charitable organization.

A qualified charitable distribution can satisfy all or part of your required minimum distribution for the year. You can make a qualified charitable distribution for more than the required minimum distribution, but you cannot apply any excess to a future year required minimum distribution.

Note: To report a qualified charitable distribution on your Form 1040 tax return, you'll use the 1099-R (even though there's no indication that it was a QCD). Enter the info as a 1099-R and you'll be asked in one of the follow-up question if it was a Qualified Charitable Distribution.

TurboTax includes the full amount of the distribution reported on your Form 1099-R on line 4a (IRA Distributions) of your Form 1040. The taxable amount reported on Line 4b will be the total distribution less the QCD amount and will have "QCD" entered next to it.

Some Rules

  • You don't have to itemize to make a QCD and you cannot claim a charitable contribution deduction for any QCD not included in your income.
  • QCDs are limited to the amount that would otherwise be taxed as ordinary income. This excludes non-deductible contributions. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of otherwise taxable income.
  • A distribution made directly to the IRA owner, who then gives it to a charity, doesn't qualify as a QCD.

Qualifications

  • You must be 70 1/2 or older to make a QCD. A QCD can be made when you reach the age of 70 1/2, even if you're not subject to RMDs until the age of 72. (This applies to taxpayers affected by the SECURE Act, which pushed the RMD requirement to age 72 if you turn 70 1/2 after December 31, 2019.)
  • The maximum annual amount that can qualify for a QCD is $100,000. This applies to the sum of QCDs made to one or more charities in a calendar year. If you file taxes jointly, your spouse can also make a QCD from their own IRA within the same tax year for up to $100,000.
  • For a QCD to count towards your current year's RMD, the funds must come out of your IRA by your RMD deadline, generally December 31.
  • Contributing to an IRA may result in a reduction of the QCD amount you can deduct. If you make a deductible IRA contribution after you turn 70 1/2, it will reduce the amount of the QCD that's excluded in your gross income.

The Charity

  • The charity must be a 501(c)(3) organization and eligible to receive tax-deductible contributions. Certain charities aren't eligible to receive QCDs, including donor-advised funds, private foundations, and supporting organizations.
  • You aren't allowed to receive any benefit in return for your charitable donation.
  • The charity must give you the same required acknowledgment for your contribution that you would need to claim the deduction for a charitable contribution.

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