On Tuesday, May 11, 2021 at 8:58:40 PM UTC-4, dpb wrote:
On 5/11/2021 7:18 PM, DerbyDad03 wrote:
...

If you donate to charities, you may be able to do the donations directly
from your IRA and not pay any taxes on the RMD. They are called Qualified
Charitable Donations. You just can't take possession of the funds. You
have to have them sent directly to the charity(s).
...

If one does have to take the RMD, the QCD is a no-brainer for _any_
charitable deductions, no matter the size.

....and not just for RMD's.


If you're going to donate anyway, it's throwing money down the tax hole,
otherwise.

In particular, a QCD is even better than a charitable contribution--the
latter is a tax deduction but from income; the QCD portion of an RMD is
not even counted as income; it's just reported as nontaxable.

It's especially easy if your IRA is set up with check-writing
privileges-- you can write the check yourself rather than have the
holder of the IRA do it for you.

Sure, you can write the check, but you better have cash in your IRA or
the ability to raise cash on your own. Some firms allow client trading
in IRA's, some don't.

The main drawback is the inability to control when the cash is withdrawn.
The distribution doesn't happen until the "personal" check is deposited by
the charity. If the custodian issues the check, the distribution occurs on
the day the check is issued.

Worst case is you decide to do a QCD as your RMD late in the year and the
charity holds your check until January. Technically you would be on the hook
for a IRS penalty of 50% of the RMD because you never really took your RMD
for the previous year. You could probably get out of it, but it would take some
work. I'm just saying that letting the custodian issue the check eliminates that
issue.

The only limitation on a QCD to qualified charity is $100K/year.

Thus my use of the word "may". ;-)


With the higher personal exemption, many who used to be able to itemize
and no longer can do so; the QCD is a savior in that regards for those
in the RMD boat.

Also works for those who turn 70 1/2 after January 1, 2020. The
SECURE Act left the QCD age at 70 1/2 when it increased the RMD
age to 72.


The CARES Act did add a provision that each can deduct up to $300 in
charitable contributions ($600 joint return) even if don't itemize
deductions. This was extended into 2021 by the last stimulus bill; it's
not permanent law so likely will sunset with the demands for higher
taxes all the proposals are going to generate.

The 100% AGI deduction is still in play if you're between 59-1/2 and
70-1/2 for withdrawals from a conventional IRA but not RMD.


As always, "consult your own tax professional"

Best. Advice. Ever.

but having been
President of the local community college foundation for last 10 years or
so, I've become pretty familiar with the rules for nonprofits.

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