Tax Tip 2022-171: Seniors can reduce their tax burden by donating to charity through their IRA
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Issue Number: Tax Tip 2022-171
Seniors can reduce their tax burden by donating to charity through their IRA
In most cases, distributions from a traditional Individual Retirement Account are taxable in the year the account owner receives them but there are some exceptions. A qualified charitable distribution is one of the few exceptions.
A QCD is a nontaxable distribution made directly by the trustee of an IRA to organizations that are eligible to receive tax-deductible contributions. QCDs can’t occur from Simplified Employee Pension plans and Savings Incentive Match Plan for Employees IRA.
Making a QCD can benefit the taxpayer by reducing their taxable income while they support qualifying charitable organizations of their choice. The taxpayer doesn’t have to worry about meeting the standard deduction or itemizing deductions with a QCD.
Financial institutions report QCDs on Form 1099-R for the calendar year the distribution occurs. There’s no number or letter code on the Form 1099-R that indicates the distribution was a QCD.
Reporting a QCD on an income tax return
Taxpayers must also file Form 8606 if the QCD came from:
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