Tis the season for giving, and qualified charitable distributions (QCDs) are a popular way to donate to a favorite charity. However, rules must be followed. In a recent Slott Report entry (“QCD Timing,” December 4), I included the following closing line: “Some IRA accounts allow check-writing privileges. Checks written to a charity from a ‘checkbook IRA’ qualify as a valid QCD.
Year after year, this topic continues to bubble up. Confusion exists over when a QCD can be done in relation to the RMD. Qualified charitable distributions (QCDs) can offset all or a portion of an RMD (required minimum distribution). However, for whatever reason, the sequencing of these items (QCDs and RMDs) confounds people. Let’s set the record straight, starting with some QCD fundamentals:
Each year it is a Thanksgiving tradition here at the Slott Report to take a moment to give thanks for the rules that are helpful to retirement savers. There are many times when rules governing retirement accounts can seem illogical, confusing, and maybe even unfair. However, there are other rules that work well and give us the tools necessary to not only save for a secure retirement but maybe even get a few tax breaks along the way.
Hello Ed Slott Team,We have a client with an IRA who wants to do a qualified charitable distribution (QCD) to a charity. The charity also has an account with the same custodian of the IRA and has asked that the client simply journal assets from her IRA directly to the charity’s account.
Question:
If an IRA owner is over age 70 ½, can they do a qualified charitable distribution (QCD) even if their spouse makes a deductible traditional IRA contribution?
Mark
Answer:
Hi Mark,
There are some complicated rules that count deductible IRA contributions made after age 70 ½ against QCDs. However, these rules apply on a per person basis. What a spouse does is not considered. Your spouse can go ahead and make a deductible traditional IRA contribution. It will not affect your QCD.
Question:
In December of 2023 I requested a transfer of my IRA funds to a new custodian. The old custodian sent a check as a direct transfer to the new custodian, but as of 12/31 the check was “in the mail.” For RMD calculations, do I just forget these “in-the-mail dollars” (as they will be accounted for next year), or do I add the value of the outstanding check to the 12/31/2023 balance to calculate my 2024 RMD from my IRA with the new custodian?
Thanks,
Ryan
Answer:
Hi Ryan,
The RMD rules do require you to adjust the 12-31 prior-year balance used to calculate RMDs for any outstanding rollovers or transfers. In your case, you would need to add the amount of the outstanding transfer into your 12-31-23 balance when calculating your 2024 RMD.
The year 2024 has flown by and the holidays season will soon be upon us. That means time is running out on year-end IRA deadlines. You will want to be sure to get the following three IRA-related tasks done sooner rather than later to avoid penalties and missed opportunities:
When presenting a particular section of our training manual, I usually make the joke that, “if we were playing an acronym drinking game, we would all be on our way to a hangover.” The segment is titled: “Missed stretch IRA RMD by an EDB, when the IRA owner dies before the RBD.” This part of the manual discusses the automatic waiver of the missed RMD penalty in a certain situation, and the acronym soup is borderline comical. So that everyone knows which end is up, here is a spiked punch bowl of common retirement-account-related acronyms.
If you are charitably inclined and have an IRA, a Qualified Charitable Distribution (QCD) can be a great strategy. With a QCD, you can move IRA funds to the charity of your choice tax-free. Here are 12 QCD rules you must know.
QUESTION: I attended the Mid-Year IRA Planning Opportunities 2024 Webinar on May 14th. I missed the reasons for not naming...
By Ian Berger, JDIRA AnalystFollow Us on X: @theslottreport Question: Can a QCD (qualified charitable distribution) be made from a 401(k)...
