Qualified Charitable IRA Distributions


On August 17, 2006, President Bush signed the Pension Protection Act. The IRS produced guidance in Notice 2007-7, Section IX, pages 13-16 (see link below). Included in both releases is a provision for individuals who are at least 70 1/2 to give all or part of their traditional or Roth accounts to a qualified charity. These transaction are called Qualified Charitable Distributions (QCD). This legislation was extended by the 2008 "bail-out" bill, the 2010 tax relief act and the 2012 tax act.

• Qualified charitable distributions can only be made in tax years 2012 and 2013. 2012 distributions can be taken and contributions can be made up until January 31, 2013.

• The distribution cannot be made until an accountholder reaches 70 1/2.

• The annual limit for charitable contributions is $100,000 per year, per accountholder.

• The distribution must be made to a qualified charity. IRS Publication 78 lists qualified charities. This is an on-line searchable publication.

• Charitable distributions may be made from traditional and Roth accounts, but not from ongoing SEP or Simple accounts. Ongoing means that contributions were made for the tax year in which a charitable distribution is proposed to be made.

• Beneficiaries of inherited traditional or Roth accounts who are at least 70 1/2 can make charitable distributions.

• Charitable distributions count as required distributions.

• Charitable distributions are not deductible as itemized deductions.

• Charitable distributions are not subject to Federal income tax withholding.

• Charitable distributions must be reported in the accountholder’s name and social security number. The check must be payable to the charity, not to the accountholder. The accountholder can hand carry the check to the charity. The distribution must be coded as a normal distribution if the funds are distributed from a traditional IRA and as a code J if distributed from a Roth.

• Charitable distribution donors will receive an IRS Form 1099-R for the distribution. Charitable distributions are reported as income to the donor on Line 15a of IRS Form 1040. To eliminate taxable income, a zero must be placed on Line 15b and "QCD" must be written to the right of Line 15b. There is a lot of bum information about this topic floating around the internet: these are not rollovers or transfers; they are reportable transactions.


IRS Notice 2007-7

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