donation out of IRA has time till Jan 31st
I have 2 questions.
1- did time run out on making donations with RMD to a non profit organization ?
2- Can RMDs be donated to non profit organizations?
3- Did Obama say we technically have time till 01/31/2011 to do the RMD if we are donating to charitable organization and do not have to pay taxes on that. is that correct?
Permalink Submitted by Denise Appleby on Mon, 2010-12-27 22:24
This may help
http://www.retirementdictionary.com/info-bytes/782/charitable-donations-…
Permalink Submitted by Alan Spross on Mon, 2010-12-27 22:45
The regretable issue here is that taxpayers who gave up waiting all year for Congress to approve the extension, and therefore took out any distribution whatsoever earlier this year cannot use their QCD for their RMD. There is no provisions for them to roll those earlier RMDs back to the IRA. Therefore, for those taxpayers a QCD will still provide the tax free distribution that will not have to be included in AGI, but they will not get the RMD benefit along with it. Many seniors are nervous about getting their RMD out on time and are not comfortable waiting 50 weeks into the year before taking out their RMD.
Accordingly, the extension to 1/31/2011 for the QCD does not solve all the problems created by this delay. But at least we all know up front for 2011. For 2012, we regress back into the waiting game.
Permalink Submitted by Al Fry on Tue, 2010-12-28 16:19
Thanks for the Link, Denise. Having been out of the loop for awhile, I may be asking for a repeat of a prior post. I have to put together a brief article by 12/31, and I Thought QCDs would be timely. Can you and Alan list the advantages of a QCD over taking the RMD and donating it? I can think of a few: a) possible lower (or no) tax on SS; b) Possible lower Medicare Part B Premiums; and c) no 30% or 50% limit on the gift. Al
Permalink Submitted by Alan Spross on Tue, 2010-12-28 16:58
Al,
Perhaps the largest is the tax benefit of exclusion from AGI, since many seniors cannot itemize and therefore would get no tax benefit from a contribution made in another manner. A smaller benefit for taxpayers will basis in their IRA is that the QCD is one of the few ways to “separate the cream from the coffee” by being deemed to apply to pre tax amounts first. This increases the taxpayer basis in the remaining IRA account, thereby reducing taxes on other taxable distributions or conversions, and future RMDs.
With respect to your item c), the QCD also preserves the percentage limits for other gifts, albeit with a lower AGI figure, but still a greater total gift capacity.
The lower AGI figure probably carries several potential benefits, eg if taxpayer is still working MAGI would be lowered thereby increasing the chance of making a regular Roth contribution. Other misc credits with MAGI limits made less likely to phase out by lowering the MAGI.
For taxpayers who can still itemize despite the QCD, the lower AGI will increase medical and misc deductions subject to % AGI limits.
I need to check into this further, but was thinking that a taxpayer making QCDs in January may be able to wait until their return was in preparation phase before deciding how much to allocate to 2010 and how much for 2011. Offhand, there does not seem to be any requirement for locking in the year of the QCD prior to executing it. This flexibility can be useful for it’s retroactive planning potential.
Permalink Submitted by Al Fry on Tue, 2010-12-28 17:06
Thanks, Alan, very helpful!
Permalink Submitted by Denise Appleby on Wed, 2010-12-29 15:10
Hi Al,
I have nothing to add.
Hope all is well.
Denise