RMD and QCD Question
Recieved a RMD in January of $3500 and immediately made a QCD of the same amount to a local charity. Since RMDs are now not required for this year will the QCD still be able to be used to offset the RMD income?
Recieved a RMD in January of $3500 and immediately made a QCD of the same amount to a local charity. Since RMDs are now not required for this year will the QCD still be able to be used to offset the RMD income?
Permalink Submitted by Alan - IRA critic on Wed, 2020-08-05 19:12
Yes, a QCD is not taxable regardless of whether it is also an RMD or not. You would report a QCD on lines 4a and 4b of Form 1040. Since there are no RMDs in 2020, the QCD would not change your 2020 tax bill, but will slightly reduce your IRA balance and therefore reduce future RMDs somewhat.
Permalink Submitted by David Mertz on Thu, 2020-08-06 01:57
Was there truly a QCD made? To be a QCD, the money must go directly from the IRA to the charity. If you receive cash and subsequently use that cash to make a contribution to charity (one interpretation of the circumstances described), it’s not a QCD and would need to be reported as taxable income in your AGI and potentially deducted as an itemized deduction, if you have itemized deductions that exceed the standard deduction. Or were there two distributions, $3,500 paid to you and a separate $3,500 that went directly to the charity. The description is ambiguous.
Permalink Submitted by Mike Caldwell on Fri, 2020-08-07 19:23
Yes, the money went directly from the IRA to the charity. Thanks for asking the question though. I also vetted the process trhough my CPA to make sure it was a QCD.
Permalink Submitted by tomd37 on Fri, 2020-08-07 20:06
The question of one or two distributions still has not been answered by the OP, but it is beginning to indicate there was only one distribution. Perhaps he/she will provide a definite statement.
Permalink Submitted by DAVID STEWART on Thu, 2020-08-27 14:33
I took RMD from TIRA in January (~$26k) with ~80% as a QCD directly to named charities. Now if I return $10k to the IRA by 8/31, what will happen? Will my tax statement show a net $16k distribution and I still show $20k as RMD? I’m trying to achieve a tax strategy to get to 0% tax on LT cap gains. WIthout returning anything, I will get hit with 15% LT cap gains tax. Thanks.
Permalink Submitted by Alan - IRA critic on Thu, 2020-08-27 17:57
If you return more than 5,200 (if there is even enough time left to do that), you will just reduce the amount you can report as a QCD. 5,200 is enough to eliminate the taxable income from your 26k distribution and you will still report 20,800 as a QCD. Rolling back more than 5,200 will not further reduce your taxable income unless you can itemize deductions for the difference between the reduced QCD and the total given to the charity, and your total itemized deductions would have to exceed your standard deduction which you are likely applying now.
Permalink Submitted by DAVID STEWART on Fri, 2020-08-28 03:17
Thank you for that explanation Alan. On the $5200 amount, is that in aggregate or per IRA? I had 2 other RMD from other accounts, but I only did the QCD from the account mentioned in the original post. The other RMDs were about $13k in total, and I already returnd them. I am single, and have pension and SSI.
Permalink Submitted by Alan - IRA critic on Fri, 2020-08-28 14:51
You can only return a distribution done over 60 days ago to the IRA that made the distribution. Therefore, the 5200 is the amount that will erase all taxable income and leave the QCD intact, but you also can only return these distributions to the IRA account that distributed them. If you distributed at least 5200 from just one account, then you can return 5200 of that distribution to that same account, doing just one rollback. Problem is the deadline is 8/31 (Monday) and too late for the US mail to be used unless the custodian agrees to go by the postmark.