If I donate directly from an IRA account to a charity, is that amount non-taxable? if so, will the 1099 reflect that fact?

[choosy]

Will my financial institute break down the taxable and non-taxable (charity) distributions as such?

[dmertz · Accepted solution]

If you are over age 70½ and have an amount transferred directly from an IRA to charity, the otherwise taxable amount (up to $100,000) is excluded from your taxable income as a Qualified Charitable Distribution.

The Form 1099-R from the financial institution will report a regular distribution.  Nothing on this form will indicate that the distribution was transferred to charity.  When entering this Form 1099-R into TurboTax, in the follow-up questions you'll need to enter the amount that was transferred to charity. TurboTax will exclude this amount from the amount reported on Form 1040 line 15b or Form 1040A line 11b and will include the notation "QCD" next to the line.

[osubken]

Thank you. This answers my question completely.

[Bobbo00]

This made me think of another question. If one's MRD is higher than what is needed, would it be better to make the charitable contribution from that and take advantage of the tax deduction?

[dmertz]

If you are eligible to make a QCD, it is advantageous to make a QCD rather then take a distribution paid to yourself and then make a charitable contribution deductible on Schedule A.  A QCD avoids the income ever being treated as part of your AGI.  If instead the money paid to you and then made as a charitable contribution reported on Schedule A, the income first becomes part of you AGI.  As part of your AGI, this potentially increases the amount of Social Security income that is taxable, potentially increases Medicare Part B premiums two years after the year of the tax return, and potentially limits Roth IRA contributions, among other things that are dependent on AGI.  A QCD is also advantageous if the total your itemized deductions with the charitable deduction is less than your standard deduction.  I'm not sure if there is any situation where a deduction on Schedule A would be advantageous over a QCD.

Of course if you don't qualify for a QCD, you would have to report such a contribution on Schedule A.  If you want to contribute more than $100,000 in a year, anything contributed over $100,000 would have to be reported as a Schedule A deduction rather than a QCD.

Note that a QCD (by a transfer to charity) applies toward some or all of your MRD as long as you have not already satisfied your MRD by making an earlier distribution during the year.  Your first distribution(s) made in the year are applied to your MRD until your MRD is satisfied.  If your MRD was already satisfied without making a QCD, a QCD would have to be made by making an additional distribution.

[Brad1]

Will the 2015 Deluxe Version of Turbotax show the notation QCD on line 15a of form 1040?.  There was confusion whether we needed the Premier Version.  Please clarify.

[dmertz]

All versions of TurboTax should handle reporting a QCD, including online Federal Free and desktop Basic if Form 1040 is not needed.  On Form 1040A, the reporting of IRA distributions will be on line 11a/b.

[gormanmike]

That is a helpful reply.  

[SweetieJean]

Just be aware that some states do not recognize QCD's, so the withdrawal might still be taxable at the state level.

[KenSher]

I am not over 701/2.  Can I request my financial institution to donate directly to a QCB on my behalf and not count that as income?  If so, how does that work?

[dmertz]

Qualified Charitable Distributions can only be done from IRAs maintained for the benefit of someone who has reached age 70½.

[MarilynG1]

@KenSher If you are not 70-1/2, you can request your financial institution make a Charitable Donation for you.

However, that is reported on Schedule A of your return as a Itemized Deduction, since it is not an RMD rollover to QCD. 

Click this link for more info on Charitable Donations.