Is there a tax advantage to ira gifting from retirement IRA if I opted out of 2020 RMD?

[rdaigle13]

This is a question for 2020 taxes for those of us who opted out of a required RMD because of covid19 and who gifted directly from a retirement IRA to lower taxes.

[dmertz · Accepted solution]

The tax advantage is the same whether or not the distribution is an RMD.  There has never been any requirement that a QCD be an RMD.

If you've already made the QCD, the question is moot.  The fact that this distribution in 2020 is not an RMD has no bearing on how it is reported on your tax return.

[rdaigle13]

Thanks for your reply. It helped me to understand my situation better.

I’m retired with 2 sources of taxable income, Social Security and RMD. I was using the QCD to reduce reported income from my RMD. If I opt out of the RMD this year, then the QCD will have no effect on my reported  RMD income and, therefore, no effect on my taxes. 

[macuser_22]

---

@rdaigle13 wrote:

Thanks for your reply. It helped me to understand my situation better.

I’m retired with 2 sources of taxable income, Social Security and RMD. I was using the QCD to reduce reported income from my RMD. If I opt out of the RMD this year, then the QCD will have no effect on my reported  RMD income and, therefore, no effect on my taxes. 

---

You can, in 2020, just take a distribution from your IRA equal to the amount of the QCD and it will be tax free.  That would give you additional income to pay the QCD without increasing your tax.   Whether you take a such a distribution or not, either way there will be no effect on your tax, unless you otherwise itemize deductions, then the QCD could be deducted on schedule A as an itemized charitable deduction.

[dmertz]

There is no opting in or out of a Required Minimum Distribution for 2020 since RMDs for 2020 have been waived.  Any distribution taken in 2020 will therefore not be an RMD, including a distribution paid directly from the IRA to a charity as a QCD.  Your options are whether or not to make a distribution at all and, if you do, whether or not you make it as a QCD; there is no option to treat it as a required distribution.

"You can, in 2020, just take a distribution from your IRA equal to the amount of the QCD and it will be tax free."  macuser_22, I'm not sure what you are trying to say with this statement.  If a distribution is made from the IRA but is not paid directly to the charity, it is includible in AGI (less any amount of the distribution that is basis in nondeductible traditional IRA contributions), it's generally not tax free.  To be excludable from AGI, the distribution must be paid from the IRA directly to a charity as a QCD.

If no distribution is made from the IRA in 2020, there is no QCD and nothing to report.