can missed RMD amounts (2016 & 17) on form 5329 be given to charity?
client missed partial amount of RMD by using wrong tables for 2016 and 2017
a. Can he have that partial amount sent directly to a charity so it is not taxed to him and he receives a tax credit for 2018?
or…
b. is the charitable option on available for current year 2018?
Thank you,
douglas
Permalink Submitted by Alan - IRA critic on Tue, 2018-06-26 23:20
Yes, he can do a QCD as long as he is 70.5, but there is no tax credit unless it is a state credit. On the 1040, a QCD is not included in AGI in the first place, so there is no itemized deduction allowed. The QCD limit of 100k applies to all QCDs done in a single tax year.
Permalink Submitted by Douglas Bauerband on Wed, 2018-06-27 00:27
1. can you expand on what a state credit is? 2. I thought you still receive a charitable tax deduction for the IRA money sent directly to the charity?thank you
Permalink Submitted by Alan - IRA critic on Wed, 2018-06-27 01:01
A few states offer a dollar for dollar state tax credit for certain contributions to charity, but those credits are limited to fairly modest amounts. For the federal, if you take a normal IRA distribution it is taxable but if you can itemize deductions and donate the amount of the distribution to charity, you can deduct the donation. But a QCD is better since a QCD distribution is not taxable and you do not need to itemize deductions to get the benefit of the donation. The QCD is not included in your AGI and that can also save on SS taxation and on certain AGI related phaseouts as well as not being included in AGI for the purposes of surcharged Medicare premium (IRMAA).
Permalink Submitted by Douglas Bauerband on Wed, 2018-06-27 19:37
You stated that the client can do the QCD for the extra RMD that was due in 2016 and 2017 and not taken. Is there any special way to fill in the 5329 since he is giving the money to charity for 2016 & 2017 rmd 2 charity
Permalink Submitted by Alan - IRA critic on Wed, 2018-06-27 20:12
No special way. For purposes of the late RMD penalty waiver, as long as he takes a distribution it does not matter whether it is a QCD or not. The 5329 for the prior years is completed the same way, but the 1040 for the year of the QCD distribution must adjust line 15b to indicate the QCD amount with only the taxable amount remaining showing on line 15b.