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Charitable Giving Tax Break

by Craig Moser on April 13, 2018

You’ve paid off your house and the kids have moved out, leaving you without any beneficial tax write offs.  You want to give to charity, but also want to take advantage of the charitable giving tax break. A QCD may be the answer you’re looking for.

Qualified Charitable Distribution

A QCD is a qualified charitable distribution.  It’s a way to transfer funds from your IRA directly to a qualifying charity.  This is done as a non-taxable distribution resulting in a charitable giving tax break. In addition, it can also satisfy your RMD (required minimum distribution), or at least some of it, for the year.

How it Works

To qualify for a QCD, you must be at least age 70½ at the time of the transaction. Basically, you get the same benefit of an itemized deduction.  It’s just a matter of approaching the issue in a different way.  Sending your RMD distribution directly to a qualifying charity results in a charitable giving tax break.

Things to Know

Here are four things you must know about your QCD and your tax return:

  1. The IRA custodian doesn’t do any special tax reporting of your QCD. They simply report the total amount of your distributions for the year. Therefore, you need to know how to handle the mechanics of filing for this part of the distribution.
  2. Your tax preparer doesn’t know you did a QCD unless you tell him/her. If you don’t tell them, you will be taxed on your QCD. In other words, tell them.
  3. Likewise, the responsibility for telling the IRS about your QCD transaction is yours. You do this by noting your QCD on Form 1040 of your federal tax return.
  4. Finally, instructions for reporting a QCD are in the Form 1040 instructions (or other form you might be using for your return). You should share these instructions with your tax preparer.

Form 1040 Instructions

For 2017, Form 1040 Instructions for reporting QCDs are found on page 25, Lines 15a and 15b, under Exception 3:

If all or part of the distribution is a qualified charitable distribution (QCD), enter the total distribution on line 15a. If the total amount distributed is a QCD, enter -0- on line 15b. If only part of the distribution is a QCD, enter the part that is not a QCD on line 15b unless Exception 2 applies to that part. Enter “QCD” next to line 15b

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