In News Release 2023-215 issued November 16, 2023 (“IR 2023-215” or simply the “IR”), the IRS reminded taxpayers who are age 70 1/2 or older that now is the time to consider a qualified charitable distribution or QCD.
Much of the text below is copied, in some cases verbatim, from the IR.
QCDs offer eligible older Americans a great way to easily give to charity before the end of the year. And, for those who are at least 73 years old, QCDs count toward the IRA owner’s required minimum distribution for the year. The IRS says that any IRA owner who wishes to make a QCD for 2023 should contact their IRA trustee or custodian soon so that they will have time to complete the transaction before the end of the year. Normally, distributions from a traditional IRA are taxed when received. With a QCD, however, these distributions become tax-free as long as they are paid directly from the IRA to eligible charitable organizations. In other words, QCDs must be made directly by the trustee or custodian of the IRA to the charity. An IRA distribution, such as an electronic payment or a check made directly to the IRA owner, does not count as a QCD, even if turned over to the charity.
The IR continues, with the IRS saying that each year, an owner age 70 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 70 or over when the distributions are made and both have IRAs, each spouse can exclude up to 100,000 from his or her IRA 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.
A 2023 QCD must be reported on the 2023 federal income tax return, normally filed during the 2024 tax filing season. In early 2024, the IRA owner will receive a Form 1099-R from their IRA trustee or custodian that shows any IRA distributions made during the calendar year 2023, including both regular distributions and QCDs. The total distribution is shown in Box 1 on that form. There is no special code for a QCD. Like other IRA distributions, QCDs are reported on Line 4 of Form 1040 or Form 1040-SR. If part or all of an IRA distribution is a QCD, enter the total amount of the IRA distributions on Line 4a. This is the amount shown in Box 1 on Form 1099-R. Then, if the full amount of the distribution is a QCD, enter 0 on Line 4b. If only part of it is a QCD, the remaining taxable portion is normally entered on Line 4b.
The IRS says “Get a receipt.” QCDs are not deductible as charitable contributions on Schedule A. But, as with deductible contributions, the donor must get a written acknowledgment of their contribution from the charitable organization before filing their return. In general, the acknowledgment must state the date and amount of the contribution, and indicate whether the donor received anything of value in return. For details, see the Acknowledgment section in Publication 526, Charitable Contributions. For more information about IRA distributions and QCDs, see Publication 590-B, Distributions from Individual Retirement Arrangements.