QCDs
Just listened to Ed’s Fireside chat with InvestmentNews. He said that January is the new December for QCDs because QCD are considered the first money out of the IRA, which I don’t quite understand. My question is: Let’s say you have a 2021 RMD of
12,000. If you take RMDs of 1,000/mo. so at the end of October you have 2,000 left; can you then do a QCD of 2,000 or more up to 100,000 by the end of December and satisfy the 2021 RMD?
Permalink Submitted by David Mertz on Thu, 2021-01-28 21:01
It’s RMDs, not QCDs that are the first money out of the IRA. You can satisfy an RMD by making a QCD, or you can make a QCD after completing your RMD. If you want your QCD to be made from your RMD, the QCD needs to be done before your RMD has already been satisfied. You can certainly make a QCD after completing your RMD, but your total distributions during the year will then exceed the amount of your RMD.
In your example with $12,000 being required to be distributed and $10,000 having already been distributed as non-QCD distributions, you can still make a QCD of $2,000 to complete your RMD and not have distributed any more than your RMD. Even if your QCD at that time is more than $2,000 (but no more than $100,000), you’ll still only have $10,000 of IRA distributions included in AGI.
Still, to avoid confusion and to give the charity sufficient time to recognize the contribution before year-end, it’s probably prudent to make your QCD the first distribution of the year.
Permalink Submitted by Ronald Miller on Sun, 2021-01-31 17:07
Thank you for your reply. Now I understand.
Permalink Submitted by Edith Fishler on Fri, 2021-02-26 12:08
If I have already taken part of my RMD can I then use some of the remainder as a QCD to reduce my AGI? I want to be sure that my initial taking of part of my RMD does not stop me from using some of my remaining RMD as a charitable contribution. Thank you.
Permalink Submitted by Alan - IRA critic on Fri, 2021-02-26 15:50
Yes, you can do this. Your remaining RMD must be enough to include the QCDs you wish to make. You can always do a QCD up to 100k, however, once your RMD including the QCDs already made is completed, any additional QCDs will no longer reduce your RMD taxable income. So you still have room to make QCDs, but it is safer to make those QCDs, then take the remainder of any RMD.