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What is a Qualified Charitable Distribution (QCD) ?

Qualified charitable distributions (QCDs) enable individuals aged 70½ and older to make tax-free contributions directly from their IRA to a qualified charity, which can help fulfill part or all of their required minimum distributions (RMDs) for the year. QCDs can be made from various tax-deferred IRA accounts, including traditional IRAs, inherited IRAs, SIMPLE IRAs, and SEP IRAs. However, it's important to note that a QCD from a SIMPLE or SEP IRA is only permissible if the account is inactive, meaning that no contributions are being made to it. Additionally, the IRS does not permit charitable contributions to be made from workplace retirement plans, such as 401(k)s.

What are the QCD limits?

For the tax year 2026, individuals can make QCDs up to $111,000. An individual can allocate up to $55,000 of the QCD limit to make a one-time contribution to a charitable remainder trust (CRT) or a charitable gift annuity (CGA). If married, each spouse can contribute up to their respective annual limits.

Are QCDs tax deductible?

A QCD does not provide a tax deduction; however, the amount of the QCD is excluded from an individual's taxable income. 

What is required for the distribution to qualify as a QCD? 

Normally, distributions from a traditional IRA are taxable when received. With a QCD, however, these distributions become tax-free if they're paid directly from the IRA to an eligible charitable organization.

QCDs must be made directly by the trustee of the IRA to the charity. An IRA distribution, such as an electronic payment made directly to the IRA owner, does not count as a QCD. Likewise, a check made payable to the IRA owner is not a QCD.

The QCD option is available regardless of whether an eligible IRA owner itemizes deductions on their tax return. Transferred amounts are not taxable, and no deduction is available for the transfer.  But, as with deductible contributions, the donor must get a written acknowledgement of their contribution from the charitable organization before filing their return.

In general, the acknowledgement must state the date and amount of the contribution and indicate whether the donor received anything of value in return. For details, see the Acknowledgement section in Publication 526, Charitable Contributions.

How are QCDs reported on IRS Form 1099-R?

Beginning with tax year 2025, code Y is used in conjunction with code 7, 4 or K (as applicable) when reporting a QCD paid from IRA on IRS Form 1099-R. 

To report a QCD use code Y with:

  • Code 7 for a QCD from a non-inherited (normal distribution) IRA,
  • Code 4 for a QCD from an inherited (death distribution) IRA, or
  • Code K for a QCD from a traditional IRA that does not have a readily available FMV.

Prior to tax year 2025, QCDs from Traditional IRAs were reported on IRS Form 1099-R using IRS code 7 (normal distribution) and QCDs from Inherited Traditional IRAs were reported on IRS Form 1099-R using IRS code 4 (death distribution).

 

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