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IRS Tax Tips November 8, 2022

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Issue Number:?Tax Tip 2022-171
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*Seniors can reduce their tax burden by donating to charity through their IRA*

In most cases, distributions from a traditional Individual Retirement Account are taxable in the year the account owner receives them but there are some exceptions [ [link removed] ]. A qualified charitable distribution is one of the few exceptions.

A QCD is a nontaxable distribution made directly by the trustee of an IRA to organizations that are eligible [ [link removed] ] to receive tax-deductible contributions. QCDs can?t occur from Simplified Employee Pension plans and Savings Incentive Match Plan for Employees IRA.

Making a QCD can benefit the taxpayer by reducing their taxable income while they support qualifying charitable organizations of their choice. The taxpayer doesn?t have to worry about meeting the standard deduction [ [link removed] ] or itemizing deductions [ [link removed] ] with a QCD.

Financial institutions report QCDs on Form 1099-R [ [link removed] ] for the calendar year the distribution occurs. There?s no number or letter code on the Form 1099-R that indicates the distribution was a QCD.

*QCD Guidelines*


* Taxpayers who make a QCD must be at least 70? years old on the day of the distribution.
* A QCD will count toward a required minimum distribution [ [link removed] ].
* The taxpayer must have an acknowledgement of the contribution [ [link removed] ].
* The amount of the QCD can?t be more than the amount of the distribution that would count as income.
* Declare the QCD as income to claim the charitable contribution [ [link removed] ] as a deduction.
* The maximum annual exclusion for QCDs is $100,000.
* When filing a joint return, the spouse can also have a QCD and exclude up to $100,000.
* Any QCD more than the $100,000 exclusion limit counts as income like any other distribution.

* The amount of QCD contribution limits for exclusion reduce after age 70? [ [link removed] ].

*Reporting a QCD on an income tax return*


* Report a QCD on Form 1040 [ [link removed] ]; report the full amount of the charitable distribution on the line for IRA distributions.
* On the line for the taxable amount, enter zero if the full amount was a QCD and enter "QCD" next to this line.
* See the Form 1040 instructions for additional information.

Taxpayers must also file Form 8606 [ [link removed] ] if the QCD came from:


* a traditional IRA and they received a distribution from the IRA during the same year, other than the QCD; or
* a Roth IRA.

*
More information*:
Retirement Plans [ [link removed] ]
IRA FAQs - Distributions Withdrawals [ [link removed] ]
Charitable Contribution Deductions [ [link removed] ]

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