QCD from RMD/1099-r

[suzjohnson1]

My husband is 70 and has an inherited IRA (from mother who was 89 when passed and taking RMD from IRA).  Are direct contributions to charities considered QCD?  The 1099-r that we received has the full RMD amount listed in box 2a but box 2b is checked.  If QCD is allowed how do we report?

[dmertz]

As long as your husband was 70½ or over at the time of the distribution from the traditional IRA, the distribution transferred directly to the charity can be claimed as a QCD.

Enter the Form 1099-R exactly as received.  In the online version of TurboTax there is a checkbox ("I transferred all or part of this money directly to charity") to mark on the page that asks, "Do any of these situations apply to you?"  The CD/download version will specifically ask if any was transferred to charity.  In either case TurboTax will ask how much of the distribution was QCD.

[suzjohnson1]

My husband was approximately  69 1/2 when the RMD was taken out from the inherited IRA.  The IRA was inherited in 2016 so falls under old rules for distribution and he has been taking RMD's since that time.  We had been told by financial advisor (multiple times) that direct distributions of part of RMD were not considered taxable income (so QCD) back as far as 2017 with no mention of age requirement.  Is this a tax law change since that time?  This was the 1st time we have tried to use the QCD.

[DianeW777]

If it is an IRA as you indicated the rules are as follows:

A provision of the Pension Protection Act of 2006 (P.L. 109-280) established the QCD, which allows individuals aged 70½ or older to contribute directly to a qualified charity from their IRA while excluding the distribution from their taxable income.

Qualified Charitable Distribution

Any IRA owner who wishes to make a QCD for 2023 should contact their IRA trustee soon so the trustee will have time to complete the transaction before the end of the year.

Normally, distributions from a traditional IRA are taxable when received. With a QCD, however, these distributions become tax-free as long as they're paid directly from the IRA to an eligible charitable organization.

• QCDs must be made directly by the trustee of the IRA to the charity. An IRA distribution, such as an electronic payment made directly to the IRA owner, does not count as a QCD. Likewise, a check made payable to the IRA owner is not a QCD.  
• Each year, an IRA owner age 70½ or over when the distribution is made can exclude from gross income up to $100,000 of these QCDs. For a married couple, if both spouses are age 70½ or over when the distributions are made and both have IRAs, each spouse can exclude up to $100,000 for a total of up to $200,000 per year. 
• The QCD option is available regardless of whether an eligible IRA owner itemizes deductions on Schedule A. Transferred amounts are not taxable, and no deduction is available for the transfer.

For any amounts contributed that did not qualify for QCD, a charitable donation could be used as part of itemized deductions if you are able to use that instead of the standard deduction.

Standard Deductions 2023:

For single taxpayers and married individuals filing separately, the Standard Deduction is $13,850 in 2023. 

For married couples filing jointly is $27,700, and  

For heads of households, the Standard Deduction is $20,800

  

If you're at least 65 years old or blind, you can claim an additional deduction in 2023 of:

• $1,850 for single or Head of Household
• $1,500 for married or Qualified Surviving Spouse.

If you're both 65 and blind, the additional deduction amount is doubled. 

@suzjohnson1 

[dmertz]

There have never been any changes to the law regarding QCDs other than changing the sunset date for the provision, finally making the QCD provision permanent and indexing the annual limit for inflation.  It has always been that the individual for whom the IRA is maintained, in this case your husband as beneficiary, must be age 70½ or over at that time of the distribution for the distribution to be eligible to be a QCD.