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

Internal Revenue Service (IRS) sent this bulletin at 11/08/2022 09:59 AM EST

IRS Tax Tips

November 8, 2022

Issue Number: Tax Tip 2022-171

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. 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 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 or itemizing deductions with a QCD.

Financial institutions report QCDs on Form 1099-R 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 70½ years old on the day of the distribution.
A QCD will count toward a required minimum distribution.
The taxpayer must have an acknowledgement of the contribution.
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 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 70½.

Reporting a QCD on an income tax return

Report a QCD on Form 1040; 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 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
IRA FAQs - Distributions Withdrawals
Charitable Contribution Deductions

Share this tip on social media -- #IRSTaxTip: Seniors can reduce their tax burden by donating to charity through their IRA. http://ow.ly/BTju50LwGaw

Thank you for subscribing to IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.

This message was distributed automatically from the IRS Tax Tips mailing list. Please Do Not Reply To This Message.

Update your subscriptions, modify your password or email address, or stop subscriptions at any time on your Subscriber Preferences Page. You will need to use your email address to log in. If you have questions or problems with the subscription service, please contact subscriberhelp.govdelivery.com.

This service is provided to you at no charge by the Internal Revenue Service (IRS).

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

Useful Links:

News Essentials

The Newsroom Topics

IRS Resources

Issue Number: Tax Tip 2022-171