RMD TO CHARITY | Ed Slott and Company, LLC

RMD TO CHARITY

What is your question?   Tom D. 

I have a client who has taken out 20k of his IRA already this year by partiall and systematic withdrawals.  His RMD for 2019 is $21kHe wants to send 20k of his RMD directly to his church.Can he still do this even though he has taken 20k withdrawals from his IRA for 2019 already?thank youdoug

  • Client made a timing error here. The 20k already distributed is not a QCD and will be in his taxable income. While he can still write a personal check for a 20k donation which would qualify for an itemized deduction, his other deductions may well be less than the new higher standard deduction, which means he would have only a partial benefit from this donation. He can still do a QCD for 20k that would not be taxed, but only 1k of that would offset his RMD. He would end up being taxed on the 20k already withdrawn that was not a QCD, would have 20k in his checking account and the church would have the other 20k, but his IRA would be down by 40k. There are other options, for example he could do a 1k QCD and hold off on further donations until January, then do a 2020 QCD first before taking other distributions. He should stop the systematic withdrawals until after his 2020 QCD has been completed. Doing systematic QCDs is too much of a hassle, so generally the QCDs should be completed before other distributions, particularly since he plans to donate close to his entire RMD.
  • There are other options depending on how and when he wants to donate for 2019,  and how much he wants to take out of his IRA and how much is to be taxed. But for 2020, he should stop the sytematic withdrawals and complete his QCD first for 2020. 
 

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