Question: I am 75 years old and took a $6,300 distribution from my IRA last year. In October, I asked my IRA administrator to send $5,000 to a local education foundation (as a tax-free qualified charitable distribution) and to send me a check for the remaining $1,300. I received a 1099-R from my IRA administrator, and it shows total distributions of $6,300. How do I report the $5,000 I sent to the charity so that money isn’t included in my adjusted gross income?
Answer: A lot of people have that question at this time of year. When you receive your 1099-R, your IRA administrator just reports the amount of money that was distributed from your IRA and doesn’t specify whether it was a withdrawal or a tax-free transfer to a charity. (After you turn 70½, you can transfer up to $100,000 each year tax-free from your traditional IRA to charity, which counts as your required minimum distributions but isn’t included in your adjusted gross income. This is called a qualified charitable distribution, or QCD.)
When you file your Form 1040, you report the total distribution of $6,300 on line 4a. Then report $1,300 on line 4b and enter “QCD” to indicate that the remaining $5,000 is a qualified charitable distribution, which is not taxable. (If you had contributed your full IRA distribution to charity, you would write $0 and “QCD” on line 4b.)
Keep an acknowledgement from the charity showing that it received your contribution in your tax records.
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.