3997 / What is a charitable IRA rollover or qualified charitable distribution?

Editor’s Note: The SECURE Act 2.0 contained a new rule that expands the availability of charitable giving with retirement funds. Under the new law, taxpayers will be allowed to make a one-time qualified charitable distribution of up to $50,000 from an IRA to a charitable remainder annuity trust, charitable remainder unitrust or charitable gift annuity. To qualify, charitable remainder annuity trusts and charitable remainder unitrusts must be funded solely with qualified charitable distributions. Charitable gift annuities be funded exclusively by qualified charitable distributions and commence fixed payments of five percent or greater not later than one year from the date of funding. The new law also indexes the current limit for qualified charitable distributions to inflation for tax years beginning after 2022.A taxpayer age 70½ or older is permitted to make a qualified charitable distribution (QCD) from a traditional IRA or Roth IRA that is not includable in the gross income of the taxpayer.¹ The exclusion for qualified charitable distributions generally is available for distributions from any type of IRA (including a Roth IRA described in Section 408A and a deemed IRA described in Section 408(q)) that is neither an ongoing SEP IRA described in Section 408(k) nor an ongoing SIMPLE IRA described in Section 408(p).²

The provision permitting a qualified charitable distribution to be excluded from gross income was allowed to expire at the end of 2011, but the American Taxpayer Relief Act of 2012 (“ATRA 2012”) retroactively revived the provision for 2012 and extended it for the 2013 tax year. The Tax Increase Prevention Act of 2014 extended the provision retroactively for 2014, and the Protecting Americans Against Tax Hikes (PATH) Act of 2015 made the provision permanent.³

A qualified charitable distribution is any distribution: |

1. not exceeding $100,000 in the aggregate during the taxable year;
2. made directly, in a trustee-to-charity transfer (including a check from an IRA made payable to a charity and delivered by the IRA owner to the charity);⁴
3. from a traditional or Roth IRA (although distributions from ongoing SEPs and SIMPLE IRAs do not qualify);
4. to a public charity (but not a donor-advised fund or supporting organization);
5. that would otherwise qualify as a deductible charitable contribution (not including the percentage of income limits in IRC Section 170(b) ( Q 739)); and
6. to the extent the distribution would otherwise be includable in gross income.⁵

No charitable income tax deduction is allowed for a qualified charitable distribution.⁶