Clients will be relieved to know that this option, first effective in 2005, has been extended for 2009. It was designed to allow an IRA owner to take all or part of their required minimum distribution (RMD) as a distribution payable to a qualified charity and not be included in the account owner’s income. Recall, RMDs have been suspended for 2009.
Some of the QCD requirements are: the IRA owner must be at least 70 ½ at the time of the transfer; it must be a direct transfer to the charity; it is capped at $100,000 per account owner per year; there is no charitable deduction, and the charitable substantiation rules apply.
I’m sure a lot of you have heard about the QCD. However, most are confused as to who reports it and how. Make no mistake; reporting is the taxpayers’ responsibility! On your Form 1040 tax return line 15 refers to IRA distributions. On 15a, list the amount for the QCD. Since line 15b refers to the amount of an IRA distribution that will be taxed, you would enter -0-. If you want you can also add the words “qualified charitable distribution” or “QCD”.
Hopefully, this brings some clarity to the reporting procedure!
Michael E. Bruder, CFP®, CTFA