Less than two weeks into the new year seems like a good time to provide a few reminders and warnings when it comes to Qualified Charitable Distributions (QCDs). As a quick refresher, remember these QCD facts:
Only available to IRA (and inherited IRA) owners who are age 70½ and over.
Capped at $100,000 per person, per year. (For a married couple where each spouse has their own IRA, each spouse can contribute up to $100,000.)
Question:
Hello,
I have a question about the calculation for RMDs when they were missed for multiple years. Is the RMD calculated on the actual balance or the balance it would have been if the RMDs had been taken?
Thank you,
In most states the legal age for alcohol consumption is 21. And you must actually be 21. When you hand your driver’s license to the bouncer and he shines a little flashlight on your date of birth, it is not good enough to say you will be turning 21 in a couple of months. Unless today is your 21st birthday or later, the bouncer will wave you away, denying access to the premises.
Question:
I appreciate all of the information you pass along, both through PBS and now through the American College. In one of your recent presentations, you discussed QCDs and their often-overlooked value. I recommend QCDs to “eligible” clients. Since the adoption of the new age 72 for RMDs, the question I have is this: As I understand the rules, people who are age 70 1/2 or older can do QCDs up to $100,000 annually. But now RMDs don’t start until age 72. Does this create a “split” definition as to who can use QCDs? That is to say, is there a gray area for those in the “gap” for the beginning age for RMD's?
Question:
I am 72 years old and have a Roth IRA. I have some extra cash in a bank account. Can I put that into my Roth IRA and how much can I contribute for 2021?
A Qualified Charitable Distribution (QCD) is a way for you to move funds out of your IRA to a qualifying charity income tax free. This can be a great strategy for those who are charitably inclined and looking to save on taxes. Here are the answers to some of the most frequently asked questions about QCDs.
How old do you have to be to take a QCD?
IRA owners who are age 70½ and over are eligible to do a QCD. Sounds easy, right? This is more complicated than it might sound. A QCD is only allowed if the distribution is made on or after the date you actually attain age 70 ½. It is not enough that you will attain that age later in the year.
Question:
Ed,
I recently saw an email from you on QCDs when deductible IRA contributions are made in the same year. It discussed how these two transactions interact with each other.
I am also wondering if the offset to the QCD would also occur for a SEP IRA or SIMPLE IRA contribution?
Thank you for your help.
When you contribute to a traditional IRA you make a deal with Uncle Sam. You can get a tax deduction and tax deferral on any earnings in your IRA. However, eventually the government is going to want its share and will require funds to come out of these accounts. That is when you must start required minimum distributions (RMDs). You may not need the money and you may not want the tax hit. Here are some strategies that can help reduce your RMD.
Would you like to make charitable donations from your IRA but aren’t eligible for a qualified charitable distributions(QCD) because you’re under age 70 ½? Are you eligible for QCDs but want to donate more than the $100,000 annual limit? Are you interested in making charitable gifts from your 401(k) or other company savings plan? If you answered “yes” to any of these questions, you should be aware of a tax strategy just just for 2021 that we call the “Mega QCD.”
Question:
Hi, Ed,
I am hoping I get to attend one or more of your events IN PERSON this year!
If you have time for a refresher . . . .
Jon’s 2021 RMD is $200k. He takes $100k as a distribution to himself in February and later, he decides to satisfy the remaining $100k as a QCD in November.
Does this work as far as the timing of the QCD?
