QCD's in a Profit Sharing Plan | Ed Slott and Company, LLC

QCD's in a Profit Sharing Plan

Hello,

I have a client the is 81 and has a profit sharing plan and they are wondering if they have RMD made out to a charity would that act like a QCD from a traditional IRA? I wasn't sure if it would have the same tax implications as a QCD from and IRA. Any information would be appreciated. Thank you.

  • No, a QCD can only be made from an IRA account. Client would have to roll over a portion of the plan balance to an IRA, and could then do a QCD from the IRA, however this would not offset the IRA RMD until the year after the rollover since the IRA will not have an RMD in the year of the rollover. 
  • If client has an RMD from the profit sharing plan, that indicates either that he has retired from that employer, he is >5% owner, or he is not a >5% owner but the plan requires all employees to start RMDs at 70.5. With a plan RMD being required, he could reduce taxes by rolling enough over to an IRA from which the QCD would offset the IRA RMD, and the lower balance would reduce the plan RMD.
 

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