Each year the Internal Revenue Service (IRS) reminds traditional IRAs owners who are over 70½ that they may make a charitable gift from their IRA. The IRS refers to an IRA charitable rollover gift as a qualified charitable distribution (QCD). An additional benefit for those who are 73 years or older is that a QCD may fulfill part or all of the required minimum distribution (RMD).

It is helpful for owners of traditional IRAs to understand how to complete a QCD, what is required to report a QCD on your tax return and the required acknowledgment from the nonprofit.

1. How to Set Up a QCD – A traditional IRA owner may contact his or her IRA custodian to start the process for a QCD. While distributions from a traditional IRA are generally taxable, the QCD payouts will not be included for income tax purposes if they are paid directly to a qualified nonprofit. Typically, a QCD is made through a check payable to the charity. An electronic payment or a check payable to the IRA owner does not qualify as a QCD. The owner must be age 70½ or older and the 2025 limit is $108,000. If spouses are both over age 70½, then the $108,000 per person limit may allow a couple to distribute up to $216,000 per year to charity. Because QCDs are not taxable, there is no charitable deduction.
    
2. How to Report Your QCD – Your QCD must be reported on your 2025 federal income tax return. You can expect to receive an IRS Form 1099-R from your IRA custodian. This will show the traditional IRA total distribution amount in Box 1. In 2025, the IRS introduced a new QCD code to be used on Form 1099-R. The QCD amount will be noted as Code Y in Box 7 of Form 1099-R. Generally, you will report the IRA distribution on Line 4 of IRS Form 1040 (the final IRS 2025 tax return may use a different line but is likely to use Line 4). You will enter the total amount of the IRA distribution on Line 4a. If the full amount is a QCD, you then enter zero on line 4b. It remains a best practice to write "QCD" next to Line 4b. If only part of the IRA distributions is a QCD, the taxable portion is normally entered on Line 4b. Not all custodians may be ready for the Code Y in Box 7 change in 2025 and the IRS has not required this reporting for 2025. Your custodian may use an older version of Form 1099-R that does not include Code Y in Box 7.  
    
3. How To Receive a QCD Acknowledgment – Your QCD is not deductible as a charitable contribution. However, you are required to obtain a written QCD acknowledgment from the nonprofit before filing your tax return. In some cases, the custodian directing the QCD does not add a note stating who the donor is, so you may want to reach out to the nonprofit to verify it has been received and provide your contact information for the acknowledgement. This acknowledgment should state the date, your name and the amount of the QCD. The acknowledgment must also indicate that you have received "no goods or services in exchange for the gift." You should retain the acknowledgment with your other 2025 tax records.

Editor's Note: Many individuals will fulfill part or all of their RMD this year through a gift to charity from a traditional IRA. It is best to start the gift process in November or early December as some IRA custodians may take time to process the transfer. If a donor has the right to make distributions from his or her traditional IRA through a checkbook, they can send the check directly to the charity. Donors should allow sufficient time for the charity to deposit the check and for the financial institution to process the check. The transfer of QCD funds must be completed by December 31, 2025.