You don't really get a tax advantage per se. You just don't have to pay tax on that income. You will encounter the screen in the interview process. See the screen shot below.
Qualified Charitable Distributions (QCDs) When
planning your IRA withdrawal strategy, you may want to consider making
charitable donations through a QCD.
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.
Any
amount donated above your MRD does not count toward satisfying a future year's
MRD.
Funds
distributed directly to you, the IRA owner, and which you then give to charity
do not qualify as a QCD.
Under
certain circumstances, a QCD may be made from a Roth IRA. Roth IRAs are not
subject to MRDs during your lifetime, and distributions are generally tax-free.
Consult a tax advisor to determine if making a QCD from a Roth is appropriate
for your situation.
What kind of charities qualify?
The
charity must be a 501(c)(3) organization, eligible to receive tax-deductible
contributions.
Some
charities do not qualify for QCDs:
- Private foundations
- Supporting organizations:
i.e., charities carrying out exempt purposes by supporting other exempt
organizations, usually other public charities
- Donor-advised funds, which
public charities manage on behalf of organizations, families, or
individuals
Tax reporting A
QCD is reported as a normal distribution on IRS Form 1099-R for any
non-Inherited IRAs. For Inherited IRAs or Inherited Roth IRAs, the QCD will be
reported as a death distribution. Itemization is not required to make a QCD.
While the QCD amount is not taxed, you may not then claim the distribution as a
charitable tax deduction.
A
QCD is not subject to withholding. State tax rules may vary, so for guidance,
consult a tax advisor.
When
making a QCD, you must receive the same type of acknowledgement of the donation
that you would need to claim a deduction for a charitable contribution.
A
tax advisor can help you determine if both your IRA and charity qualify for
QCDs.
