RMD & Tax Related
Hello,
Client has to take out his RMD from his Company’s Profit Sharing Plan, totaling $218k this year.
Separately, Client is setting up a Private Foundation; the PF will make contributions to 50% Limit Organizations (e.g. temples and churches).
Question: Is there any difference tax-wise if the Client (1) receives the RMD and then cuts a check to his PF, OR (2) the RMD goes directly into his PF, to the extent permitted?
Assume there is no federal income tax on the RMD that gets contributed (whether 1 or 2 above) because the contribution will be < 60% of the Client's AGI.
Thank you!
Jason
Permalink Submitted by Alan - IRA critic on Wed, 2021-09-29 23:45
Not sure whether the RMD being included in AGI will trigger any additional tax despite taxable income not being increased if the charitable deduction equals the 1099R. The 401k plan may not agree to write the check to the PF, but whether they do or not, the 1099R will be the same as if paid to client, and the itemized deduction should be the same. It is possible that direct payment will make a paper trail to document the contribution more difficult than if there was a cancelled check record. I can’t comment on the ever changing AGI limitations on contributions to private foundations and the effect on the maximum itemized deduction.