QCD's in 2020 | Ed Slott and Company, LLC

QCD's in 2020

Since there are no RMD's required in 2020, can we still do a Qualified Charitable Distribution in 2020 and avoid taxes on the distribution? thanks

Yes.  There has never been any requirement that a QCD be an RMD.

I turned 70 1/2 in April 2020. I don't have to take an RMD until 2021.  Will my QCD in 2020 lower my AGI or will it become a taxable income deduction below AGI ?  It would be nice if I can use my QCD to off-set a 2020 Roth IRA conversion.

You can do a QCD as of April, but since there are no 2020 RMDs, it will not offset RMD income. It will be a non tax event for 2020, not increasing or decreasing 2020 taxable income, but by reducing the IRA balance it would slightly reduce future RMDs. A 2020 QCD will also not offset conversion income since the conversion is separate and will add to your 2020 taxes. Your best overall option is probably doing an incremental 2020 conversion using the space that would have been your RMD. Then defer the 2020 QCD to 2021 and combine with the 2021 QCD, both will offset 2021 RMD income depending on the amounts of your RMD and QCDs in 2021. 

My client took a $200K RMD in January of which $50K was elected as a QCD. If he returns $150K to his IRA by the end of August as permitted by the recent guidance,  is the $50K QCD simply a reduction in his IRA balance? Meaning it is neither increasing taxable income nor deductible as a charitable contribution. Thank you.

Yes, the $50K would remain a QCD.

That is correct. His IRA balance will be decreased by 50k and that will reduce future RMDs. 2020 AGI and taxable income does not change as a result of the QCD. 

thanks Alan.

Is there concern about a client doing QCD to a non-profit ( foundation ) which the client is an officer or has control of the decision making process of the non-profit. thanks

Likely not eligible. Client needs to determine if this foundation falls under Sec 509(a)(3) or if client falls under Sec 4946 making client a "disqualified person". Parsing through these codes is challenging.

 

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