Maximize Your Philanthropy: IRA Owners Can Gift up to $100K Tax-Free to Charities
The IRS is letting people over 70½ years old who have an IRA (a type of retirement savings account) know they can give up to $100,000 to charity without paying taxes on it each year. This is called a qualified charitable distribution (QCD). It's a handy way for older Americans to donate to charity, especially as the year ends. Plus, if you're 73 or older, this donation can count as part of the minimum amount you must take out of your IRA each year.
How to Make a QCD
If you want to make a QCD for 2023, talk to the person or company managing your IRA soon. They need time to arrange everything before the year ends. Normally, when you take money out of your IRA, you have to pay taxes on it. But with a QCD, you don't, as long as the money goes straight from the IRA to a qualified charity.
Make sure the money goes directly from the IRA to the charity. If it comes to you first, like through a check or electronic transfer, it won't count as a QCD.
If you're over 70½ when you make the donation, you can avoid paying taxes on up to $100,000 that you give. If you're married and both you and your spouse are over 70½ and have IRAs, each of you can give $100,000 tax-free, totaling $200,000 a year.
You can do this even if you don't list deductions on your tax form. The money you transfer isn't taxed, and you can't claim it as a deduction.
Reporting Your QCD
When you file your taxes for 2023 (usually in 2024), you need to report any QCDs you made. Your IRA manager will send you a form (Form 1099-R) showing all the money you took out of your IRA in 2023, including any QCDs. The total amount is listed in one of the boxes on the form. When you fill out your tax form (Form 1040 or 1040-SR), put the total IRA amount on one line. If all of it was a QCD, write '0' on the next line and put "QCD" next to it. If only part of it was a QCD, write the taxable part on this line.
Getting a Receipt
Even though QCDs aren't tax-deductible like other charity donations, you still need a written confirmation from the charity. It should say when and how much you gave, and if you got anything in return for your donation. Check the IRS's Publication 526 for more details on what the acknowledgement should include.
For more information about IRA distributions and QCDs, see the IRS's Publication 590-B.
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