2018 tax returns, QCD | Ed Slott and Company, LLC

2018 tax returns, QCD

I took a QCD in 2018 and my cpa filed my returns taking that into account. I want to reconfigure my 2018 tax returns, as if I did not take QCD, to determine what my federal and state taxes would have been. I added the amount of the QCD back into taxable income. From there I got totally confused. I'm mathematically challenged and need help. P.S. cpa not available to answer.

Barberella

thank you

Not sure why you are trying to determine what your tax liability would have been. Please advise if your QCD was for less than, equal to, or more than your RMD, and remember you still must complete your RMD whether you use a QCD or not. Would you still have donated the same amount from your other cash and then itemized?  Need more details to determine why you want to determine what your 2018 liability would have been. Are you planning for 2019?

This is both a what-if question, and better planning for 2019.  My 2018 QCD was less than my RMD, and I completed my RMD. I would not have donated the same amount from other cash and then itemized.I did take not do a QCD for the prior year, and my income had gone up somewhat for 2018.  I realized I should do a QCD, and withhold more for taxes from my RMD.  My intended purpose was both to lower my taxes, and to keep my income below the $85K threshold. The QCD amount I decided on was for more than I was comfortable donating. The amount of taxes withheld from RMD was increased.  I had no idea of what I was doing.  I miscalculated. I received significant federal and state tax refunds because QCD was higher than it had to be.My taxable income was @$200 above 85K and Medicare and drug plan charges were increased monthly by $66.50 ($798 per annum).  I'd want to know what my 2018 liability would have been with a much lower QCD.  I might have come out with lower refunds. I thought I could determine that by adding the amount of the QCD back in to the taxable income.  Then I lost my way.  I want do better planning for 2019.

  • Yes, because your QCD was less than your RMD, if you reduced your QCD your MAGI and taxable income would have increased. You could determine that by adding the reduced QCD amount to your MAGI and taxable income like you started to do.  You would be over the IRMAA threshold by more, but probably not enough to go into the next higher IRMAA tier. But you would also have more disposible income to pay those taxes because you would have received the amount by which your QCD was reduced rather than donating it. 
  • Actually, your QCD should have been 250 more as that would have eliminated the IRMAA surcharge. It takes very careful planning to control your MAGI to fall just under the IRMAA threshold, but that could be difficult if your other non IRA income fluctuates right up to year end.
  • You can withhold any amount you wish from the RMD less the QCD, but probably not less than 10%. The amount you actually owe in April is dependent on the other income. You need to withhold enough to meet a safe harbor, usually your tax liability for 2018 to avoid any penalty, even though you may still owe in April.
 

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