Qualifying IRAs

• If you have a traditional IRA or a Simplified Employee Pension (SEP) IRA you started on your own behalf, you can make a qualified charitable distribution (QCD). This also applies to Roth IRA distributions, though these are generally tax-free anyway. SEP IRAs, employer opened and contributed to on your behalf, as well as Savings Incentive Match Plans for Employees (SIMPLE) IRAs do not qualify for QCDs.
  
  

Making a QCD

• To make a QCD, you must request a direct transfer from your IRA custodian to a recipient charitable organization. In return, the organization must provide you with a receipt that records the transaction, as though you had given the money directly. Before you make a donation, check with an organization to make sure it is qualified to receive QCDs. The group must be a 501(c)3 and cannot be a donor-advised fund.
  
  

QCDs and Taxation

• You can transfer up to $100,000 each year the QCD rule is in effect without owing taxes. The IRS includes amounts that exceed $100,000 as taxable income. You will usually receive a 1099-R from your IRA custodian, and must report the donation on your 1040. QCDs count towards your annual required minimum distribution, the amount you are required to withdraw from your traditional or SEP IRA beginning the year you turn 70 1/2.
  
  

History

• The rule allowing tax-free charitable donations was enacted in 2006 and expired in 2009. In early 2011, the U.S. Congress passed a law to extend the provision through the end of the year, and made it effective retroactively for 2010. Because this was passed so late, Congress gave taxpayers until January 31, 2011 to apply their charitable IRA donations to their 2010 tax returns. Though the rule has been popular, Congress must enact legislation if it is to be extended beyond 2011.