The IRS has reminded taxpayers with an individual retirement accounts (IRA), who are above the age of 70 1/2, that they are eligible to transfer up to $100,000 as qualified charitable distributions (QCD) to charity each year, tax-free. For a married couple, if both spouses are aged 70 1/2 or over and both have IRAs, each spouse can exclude up to $100,000 for a total of up to $200,000 per year.

While making QCD transactions, remember:

  • QCD transactions should be completed by the end of the year and these distributions become tax-free as long as they’re paid directly from the IRA to an eligible charitable organization electronically, directly to the charity, or by check.
  • Any payment made directly to the IRA owner, does not count as a QCD.
  • Transferred amounts are not taxable, and no deduction is available for the transfer, regardless of whether an eligible IRA owner itemizes such deductions in Schedule A of Form-1040, Itemized Deductions.

Reporting for QCDs require that:

  • A QCD made in 2022, must be reported on the 2022 federal income tax return, filed during the 2023 tax filing season.
  • In early 2023, the IRA owner will receive Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. from their IRA trustee that shows any IRA distributions made during calendar year 2022, including both regular distributions and QCDs.
  • The donor must get a written acknowledgement of their contribution from the charitable organization, before filing their return. The acknowledgment should state the date and amount of the contribution and indicate whether the donor received anything of value in return.