Qualified Charitable Distributions, or QCDs, are a great way to give to your favorite charitable organization. A QCD is a transfer directly from your IRA to a charity that excludes up to $108,000 for 2025 from your required minimum distribution that year. For those who are forced to take RMDs or will be in the near future, QCDs are a great way to not have to recognize extra potentially unwanted income. This makes QCDs a potentially great tool for charitable giving, but there are several issues that you should be aware of.
1. You must be 70 ½ on the date of the transfer in order to make a QCD.
2. You cannot do a 60-day rollover and send the money to the charity before the 60th day. It must go directly from your IRA to the charity.
3. You cannot receive anything in exchange for the gift.
4. The gift can only be made from an IRA. A distribution from a retirement plan, such as a 401(k), does not qualify as a QCD. Likewise, it does not apply to Donor Advised Funds or private foundations.
It is imperative that you let your tax preparer know that you actually did a QCD. Until last month (May 2025), there was no type of tax reporting (1099-R) that you did a QCD. The amount was just included with your distributions and not coded as a QCD. The burden falls on you to report it.
As of May 2025, not up until then in 2025, there will now be Box 7 to account for a QCD. Code (Y) will be checked after that date. We are not sure how the IRS intends to address QCDs earlier in 2025 as no guidance has yet been given. This is why it is extremely important that you let your tax preparer know if you did a QCD earlier in 2025.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
