Through the 2011 tax year, the Internal Revenue Service allowed taxpayers to donate their required minimum distributions, or RMDs, directly to charity to avoid including them in their taxable income. However, at the time of publication, that provision has not been extended. If qualified charitable distributions aren't extended, as of the 2012 tax year you are required to report the RMD as an IRA distribution and a charitable deduction.
To take a qualified charitable distribution, you must be over 70 1/2 years old, and your RMD must be paid directly to the charity by the trustee of your IRA. If you receive the money and then donate it to charity, you don't qualify to report the donation as a qualified charitable distribution on your taxes. The qualified charitable distribution can't exceed $100,000. If you are married filing jointly, the $100,000 limit applies separately to each spouse.
To report a qualified charitable distribution, you must use either Form 1040 or Form 1040A. Report the total amount of your IRA distributions for the year on line 15a of Form 1040 or line 11a of Form 1040A. Then report the taxable portion of the withdrawal, which does not include the qualified charitable distribution, on line 15b of Form 1040 or line 11b of Form 1040A. If all of your withdrawal went to the qualified charitable distribution, none of the distribution is taxable. Last, write "QCD" next to line 15b of Form 1040 or line 11b of Form 1040A.
If qualified charitable distributions aren't extended, you must take your required minimum distribution from your IRA and then donate it to charity. Since charitable donations require you to itemize, you must use Form 1040. On Form 1040, your IRA distribution goes on line 15. If it's all taxable, simply report the total on line 15b. If, on the other hand, a portion isn't taxable, such as if you made nondeductible contributions to the IRA, report the total amount on line 15a. Then use Form 8606 to figure the taxable portion and report it on line 15b.
When you make the donation yourself, you must report the deduction for the charitable contribution as an itemized deduction on Schedule A. However, your deduction is limited to no more than 50 percent of your adjusted gross income -- and may be only 30 percent if you are donating to certain charities like nonprofit cemeteries or fraternal organizations. If your donation exceeds these limits, you can carry over the excess for up to five more years.
- Internal Revenue Service: Publication 590 -- Individual Retirement Arrangements (IRAs)
- Internal Revenue Service: Employee Plans News and Retirement News for Employers - January 12, 2011 - Qualified Charitable Distributions for 2010 and 2011
- U.S. Trust: 2012: Tax Changes with Uncertainty Ahead
- Internal Revenue Service: Publication 526 -- Charitable Contributions
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