IRA RMD Charitable Contribution for 2020
Hello. A client wants to give her 2020 RMD to her church as she has in the past. This year, with RMD’s begin waived, is it still tax free? Thanks.
Hello. A client wants to give her 2020 RMD to her church as she has in the past. This year, with RMD’s begin waived, is it still tax free? Thanks.
Permalink Submitted by Alan - IRA critic on Tue, 2020-10-20 19:03
Yes, the non taxable QCD can still be done but it will not reduce taxable income for 2020. If client waits until January, 2021 when RMDs will resume, client could double up on the QCD (2020+2021), and 2021 taxable income will be reduced up to the full amount of the 2021 RMD.
Permalink Submitted by tomd37 on Tue, 2020-10-20 21:45
Alan – Are you saying that if a person qualified for making a 2020 QCD elects to do so and does not take their remaining 2020 RMD because RMDs are not required in 2020, that the QCD becomes taxable income even though it would not have been part of taxable income had they taken the remaining portion of the RMD? I took a $19K QCD distribution from my traditional IRA with the idea that it would not be reported on line 4b of the 1040, but would be reported on line 4a. Did I make a huge mistake by not delaying my RMD until next year and then double up on my QCDs in 2021?
Permalink Submitted by Alan - IRA critic on Tue, 2020-10-20 22:50
No Tom, not saying that. The 2020 QCD is not taxable, but neither does it reduce 2020 taxes like it would if there was a 2020 RMD to offset. In your case, your QCD would be reported as you indicated, with 0 on 4b. If there had been an RMD required in 2020, then your QCD would have reduced that taxable RMD and saved you taxes in 2020. Without a 2020 RMD, the QCD is still non taxable, but is does not reduce your other 2020 income. However, by reducing your IRA year end value, it will slightly reduce your 2021 and future RMDs due to simply to a lower IRA balance.In the case of the OP, since we are only a little over 2 months from year end and RMDs will be back in 2021, deferring the 2020 QCD to 2021 and adding it to the 2021 QCD would result in both QCDs reducing taxable income in 2021 except to the extent the total QCDs exceeded the 2021 RMD. Many people would not want to make the charities wait, but with only 2 months to go, they would only be waiting for that length of time and both year’s QCDs could then be made in January.
Permalink Submitted by tomd37 on Wed, 2020-10-21 02:47
Completely understood now Alan. Thanks for explaining this clearly. Also found an article on Ed Slott’s site. Stay well and safe with this virus and hope you didn’t go to and possibly be exposed at the rally there recently.