IRA QCD Cover RMD?
Will an IRA QCD distributed for a client turning age 72 in October, 2021 count toward their 2021 IRA RMD if the IRA QCD is distributed from the IRA prior to reaching age 72 in October, 2021? I know they can do an IRA QCD since they are over age 70.5. It is not clear to me the IRA QCD will count toward their 2021 IRA RMD unless it is distributed from the IRA after they reach age 72 in October, 2021.
Permalink Submitted by Alan - IRA critic on Thu, 2021-01-21 22:53
The first distribution taken in 2021 will be applied toward the RMD regardless of when in 2021 age 72 is reached. Therefore, a QCD done now will be a valid QCD and also count toward the RMD. QCDs should be completed before the RMD is completed, but the process can start as early as 1/1.
The first RMD can be deferred to as late as 4/1 in the following year, so the 2021 RMD can be delayed to 4/1/2022. However, that would result in 2022 income including two years worth of RMDs. For most there is no benefit in deferring the first year, but in certain situations deferring part to the following year will lower taxes for the two years combined by generating a larger savings in year one to more than offset the increase in year two. QCDs should not normally be done unless they are offsetting RMD income. This option of deferral only applies to the year you reach 72, or the year you retire for the retirement plan that goes with the job being left.