IRA – RMD – Charitable Donation – Tax Deduction
My first RMD is due April 1, 2018. In early December of 2017, I intend to instruct my IRA’s Trustee to:
1. calculate my RMD [which I shall check and recheck];
2. distribute one-half of the amount so calculated to a bona fide 401 (c)(3) charity of my choosing; and
3. deposit the remaining one-half balance into my CMA;
In mid February of 2018 I shall be preparing to file my federal and New York state income tax returns.
Query: May I deduct all or a portion of the amount donated to the charity on my 2017 federal and/or New York state returns? In your response, please explain why, or why not, the deduction may, or may not, be taken. Thank you.
Permalink Submitted by Alan - IRA critic on Fri, 2017-04-21 20:10
If you plan to do a QCD, it cannot be done until you actually hit 70.5, so be sure you have reached that date when your request a QCD. Only the other 50% of your 2017 RMD will be taxable in 2017 as long as you report this correctly on your 2017 return and request the QCD properly from the IRA custodian. A QCD is almost always more tax efficient than taking the full RMD with no QCD and making your own charitable contribution because a QCD is not included in your AGI. You cannot do a QCD and also take an itemized deduction for the same contribution because a QCD is already fully pre tax.
Permalink Submitted by William Bellotti on Fri, 2017-05-12 01:51
Thank you for your response. A follow-up question: How does the custodian report the QCD on the 1099-R?
Permalink Submitted by Alan - IRA critic on Fri, 2017-05-12 02:32
It is reported like any other normal distribution (Code 7 or 4). Now that the QCD is permanent you might expect the IRS to assign a specific distribution code for a QCD, but they have not. Therefore, the taxpayer reports the QCD in the same manner they would for an IRA rollover, but with “QCD” entered next to line 15b instead of “rollover”.