Did you know that annually, individuals 70.5 and older can transfer up to $100,000 as a Qualified Charitable Distribution (QCD) from their traditional IRA to a qualified charity such as Citizens for Animal Protection (CAP)? Following the rules for a QCD, you must transfer directly from your IRA to CAP in order for your gift to qualify as a tax-free- transfer. Your tax advisor can help you determine if this program can work for you and CAP. Please note the requirements are different with a Roth IRA.
According to Kiplinger, "Using a QCD is a tax-savvy strategy that allows you to transfer up to $100,000 per year from your IRA directly to a qualified charity. It is only available to IRAs and individuals who have reached RMD age (70.5). Any amount processed as a QCD counts toward your RMD requirement and reduces the taxable amount of your IRA distribution. This lowers both your adjusted gross income and taxable income, resulting in a lower overall tax liability."
What is a qualified charitable distribution?
Generally, a qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity.*
Can a qualified charitable distribution satisfy my required minimum distribution from an IRA?
Yes, your qualified charitable distributions can satisfy all or part the amount of your required minimum distribution from your IRA. For example, if your 2014 required minimum distribution was $10,000, and you made a $5,000 qualified charitable distribution for 2014, you would have had to withdraw another $5,000 to satisfy your 2014 required minimum distribution.*
How are qualified charitable distributions reported on Form 1099-R?
Charitable distributions are reported on Form 1099-R for the calendar year the distribution is made.
How do I report a qualified charitable distribution on my income tax return?
To report a qualified charitable distribution on your Form 1040 tax return, you generally 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 qualified charitable distribution. Enter “QCD” next to this line. See the Form 1040 instructions for additional information.
