Waiver of RMDs for 2020 and impact on QCDs

Submitted by Peter Hall on Sun, 2020-03-29 18:32

With the waiver of RMDs for 2020 the distributions are no longer mandatory. How does this impact QCDs?



Submitted by Alan - IRA critic on Sun, 2020-03-29 19:00

  • QCDs can still be done, but there are no RMDs to offset. A QCD from an IRA would still be non taxable. but would not save any tax money by reducing otherwise taxable income from the RMD. Therefore, the QCD might be deferred to 2021 when RMDs resume.  There is also a new above the line deduction for charitable contributions, but is it limited to $300. A taxpayer could make a $300 cash contribution, deduct it, and still take the standard deduction, so this would reduce taxable income by $300.  A QCD would not reduce taxable income without an RMD, and all it would do is drawdown the IRA balance and reduce future RMDs.
  • This is similar to the taxpayer who does not start RMDs until age 72, but can still do a QCD at 70.5. That QCD prior to the start of RMDs would function like a QCD this year when there are no RMDs.

Submitted by david zolt on Mon, 2020-03-30 18:34

What about the rule that you can’t make QCDs once the RMD for the year has been made/satified?  For 2020, is the QCD limited to what the RMD would have been without the CARES Act?

Submitted by David Mertz on Mon, 2020-03-30 19:15

  • “What about the rule that you can’t make QCDs once the RMD for the year has been made/satified?”
  • There is no such a rule and there never has been such a rule.

Submitted by William Tuttle on Mon, 2020-03-30 22:57

  • What you may be thinking about, is that distributions are first considered to be RMDs.
  • If you want your QCD amounts to apply against your RMD amount, they must be made before you exceed that amount in distributions.
  • You can take QCDs at anytime, but the ability to take them in place of RMDs is as described above.
  • A QCD can certainly be taken in 2020, but does not apply against any RMD amount, because none is required.

Submitted by david zolt on Tue, 2020-03-31 01:04

Thanks, DMx and Permalink for straightening out my understanding.  I read the rule that Permalink summarized a while back, but didn’t get it quite right at the time.

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