Qualified Charitable Distributions (QCDs) allow IRA owners and beneficiaries age 70½ or older to transfer money directly from an IRA to a qualified charity and exclude that amount from taxable income.
When done correctly, a QCD can also help satisfy your Required Minimum Distribution (RMD) for the year while keeping your adjusted gross income (AGI) lower than it would be with a taxable withdrawal.
For individuals who give charitably but don’t itemize deductions, this reporting detail matters. The tax benefit of a QCD isn’t automatic; it depends on how the distribution is reported on your income tax return.
A Qualified Charitable Distribution is a direct transfer from your IRA to a qualifying 501(c)(3) public charity made on or after the date you turn 70½. If all requirements are met, the amount transferred is excluded from your gross income.
QCDs can be made from:
To qualify, the funds must move directly from the IRA custodian to the charity. A distribution paid to you and later donated does not qualify. However, a check made payable to the charity and mailed to you for delivery is still considered a direct transfer.
QCDs are subject to an annual per-person limit that is indexed for inflation. If you are required to take RMDs, a properly completed QCD can satisfy all or part of that requirement for the year.
Important limitations:
Your IRA custodian reports total distributions for the year on Form 1099-R:
Because custodians typically report the full distribution amount, the responsibility for claiming the QCD exclusion depends on how the transaction is reported on your tax return.
Beginning with 2025 Forms 1099-R, the IRS introduced Code Y (used in combination with other distribution codes) to help identify QCDs. Use of Code Y is optional; some custodians may include it, while others may not.
Whether or not Code Y appears on your 1099-R, you must still report the QCD correctly on your tax return to receive the tax benefit.
The following is a general illustration of how QCDs are typically reflected on IRS forms, based on current IRS instructions. Individual tax returns vary, and taxpayers should rely on their tax professional when completing IRS forms.
QCDs are reported on your individual income tax return, not on the 1099-R itself. Follow these steps:
Enter the full amount from Box 1 of Form 1099-R on Form 1040 (or 1040-SR), line 4a.
On line 4b:
Check Box 2 (“QCD”) on line 4c to indicate why the taxable amount is reduced.
Do not also claim a charitable deduction for the same QCD on Schedule A.
If you have basis in a Traditional IRA and take other taxable IRA distributions in the same year as a QCD, or if a QCD is made from a Roth IRA, you may need to file Form 8606. This is an area where coordination with your tax professional is especially important.
Maintain the following records with your tax files:
Excluding the QCD from income and also deducting it on Schedule A.
Fix: Exclude it only on Form 1040.
Taking the distribution personally and then donating it.
Fix: The check must be payable to the charity.
Donor-advised funds and private foundations do not qualify.
The form usually shows the full distribution amount.
Fix: Adjust the taxable amount on Form 1040 and check the QCD box.
As December 31 approaches:
How it’s reported:
Why this works: The total from Form 1099 R Box 1 goes on line 4a, but you include only the taxable portion on line 4b. If the entire distribution were a QCD, line 4b = 0, and you’d still check box 2 on line 4c to note this was a QCD.
The result is that only the taxable portion is included in income, even though the full distribution appears on Form 1099-R.
No. QCD treatment is claimed on Form 1040 by reporting the reduced taxable amount and checking the QCD box.
No. QCDs are limited to IRAs.
A QCD can satisfy RMDs from IRAs but does not offset RMDs from employer-sponsored retirement plans.
For gifts over $250, you must receive a written acknowledgment stating the amount, date, and that no goods or services were provided.
You may be able to correct this by filing an amended return with the proper documentation. A tax professional can help determine the appropriate steps.
Yes. Because a QCD is excluded from taxable income, it may lower AGI compared to a taxable withdrawal, depending on the taxpayer’s overall circumstances, which can affect Medicare premiums, Social Security taxation, and other income-based thresholds.
Yes. The annual QCD limit applies to each individual IRA owner, not to a household.
Qualified Charitable Distributions can be a powerful way to give, but their impact depends on how they’re coordinated with RMDs, tax planning, and long-term charitable goals.
At Spaugh Dameron Tenny, our advisors help clients think through how charitable strategies like QCDs fit into a broader, well-integrated financial plan. If charitable giving is part of your long-term priorities, learning how it connects to the rest of your plan can make a meaningful difference.
Any discussion of taxes is for general information purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax, and accounting advisors as appropriate.
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Megan Robinson, FPQP™, CRPS®, serves as the investment coordinator at Spaugh Dameron Tenny, where she oversees account transfers, monitors client portfolios, and implements tailored investment strategies. With certifications in financial planning and retirement plan design, Megan ensures that the operational side of wealth management runs smoothly and accurately. Known for her attention to detail and client-first mindset, she plays a crucial behind-the-scenes role in providing executives, physicians, dentists, and retirees with efficient, coordinated financial care.
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