As you continue with the
interview screens, you will be asked if you donated a portion or all of the
distribution to charity. There are eligibility requirements. TurboTax will
exclude this amount and will show the notation - Qualified Charitable Distribution (QCD). See the screenshot below.
A QCD is a direct transfer of
funds from your IRA custodian, payable to a qualified charity. QCDs can be
counted toward satisfying your minimum required distributions (MRDs) for the
year, as long as certain rules are met.
In addition to the benefits of
giving to charity, a QCD excludes the amount donated from taxable income, which
is unlike regular withdrawals from an IRA. Keeping your taxable income lower
may reduce the impact to certain tax credits and deductions, including Social
Security and Medicare.
Can I make a QCD?
While many IRAs are eligible
for QCDs—Traditional, Rollover, Inherited, SEP (inactive plans only), and
SIMPLE (inactive plans only)* —there are requirements:
- You must
be 70½ or older to be eligible to make a QCD.
- QCDs are
limited to the amount that would otherwise be taxed as ordinary income.
This excludes non-deductible contributions.
- 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,
however, you file taxes jointly, your spouse can also make a QCD from his
or her own IRA within the same tax year for up to $100,000.)
- For a QCD
to count towards your current year’s MRD, the funds must come out of your
IRA by your MRD deadline, generally December 31.
See the screenshot below.
