The interview process will ask you the question. After you enter the 1099-R for your IRA distribution, as you continue through the interview questions it will ask you if you gave any of the distribution to charity. That's where you will be able to show that it was a Qualified Charitable Distribution.
If the distribution is appearing on line 4 it's because you did not check the IRA/SEP/SIMPLE box when you entered the 1099-R in TurboTax. If the IRA/SEP/SIMPLE box is not checked on the actual 1099-R, then either the 1099-R is not filled out correctly or the account is not a traditional IRA.
Requirements For Qualified Charitable Distributions From An IRA
The core requirements for making Qualified Charitable Distributions (QCDs) from an IRA to a charity are contained in IRC Section 408(d)(8) (as created under Section 1201 of the Pension Protection Act of 2006).
Under the QCD rules, the IRA owner must be at least age 70 ½ to do the QCD to the charity (and notably, the IRA owner must actually be age 70 ½ or older on the date of distribution, not merely turning 70 ½ sometime that year). Under IRS Notice 2007-7, Q&A-36, even a beneficiary of an inherited IRA can be eligible for a QCD, as long as the beneficiary themselves is at least age 70 ½ on the date of the distribution.
The maximum dollar amount of a QCD for any individual from his/her IRAs is limited to $100,000 per year. For QCDs, this annual limitation is done on a “per-taxpayer” basis (across any/all of the individual’s IRAs, regardless of how many accounts are used to generate the charitable distribution), though as a per-taxpayer limitation a married couple can each do up to $100,000 (as long as each taxpayer’s QCDs come from his/her respective IRA).
Only distributions from an individual IRA (including a rollover IRA) are eligible, and not from a SEP or SIMPLE IRA (if they are still “active” and receiving ongoing employer contribution..., nor from any type of employer retirement plan. Notably, a QCD is permitted from a Roth IRA as well, though most distributions from a Roth IRA are already tax-free and therefore QCD rules wouldn’t be relevant anyway (as described further below).
To qualify for QCD treatment, the rules also stipulate that the distribution must go to a public charity (as described in IRC Section 170(b)(1)(A)), and thus cannot go to a private foundation, nor (as specified in the tax code) may a QCD go to a charitable supporting organization or a donor-advised fund, either.
In addition, the charitable distribution from the IRA must be one that otherwise would have been eligible for a full charitable deduction under IRC Section 170 (even though QCDs are not eligible for a deduction, as discussed below). This “must have been eligible for a full deduction” rule ensures that the IRA donor does not receive any kickbacks or other “quid pro quo” benefits for the donation (which would limit the donor’s deduction to only the net amount contributed and fail the “full deduction” QCD requirement). This requirement also prevents any “split-interest charitable trust” (e.g., a charitable remainder trust or a charitable lead trust) from being an eligible QCD beneficiary.
