topic Re: QCD from an IRA. in Retirement tax questions

PRIOR TO 2020: Is there a tax advantage to take out more rmd than required

crsteine — Thu, 27 Apr 2023 18:44:00 GMT

I gave $2000.00 more than required directly to charity. How do I enter it for a tax advantage?

You don't really get a tax advantage per se. You just don...

Coleen3 — Tue, 04 Jun 2019 20:01:46 GMT

You don't really get a tax advantage per se. You just don't have to pay tax on that income. You will encounter the screen in the interview process. See the screen shot below.

Qualified Charitable Distributions (QCDs)

When planning your IRA withdrawal strategy, you may want to consider making charitable donations through a QCD.

A QCD is a direct transfer of funds from your IRA custodian, payable to a qualified charity. QCDs can be counted toward satisfying your minimum required distributions (MRDs) for the year, as long as certain rules are met.

In addition to the benefits of giving to charity, a QCD excludes the amount donated from taxable income, which is unlike regular withdrawals from an IRA. Keeping your taxable income lower may reduce the impact to certain tax credits and deductions, including Social Security and Medicare.

Can I make a QCD?

While many IRAs are eligible for QCDs—Traditional, Rollover, Inherited, SEP (inactive plans only), and SIMPLE (inactive plans only)* —there are requirements:

You must be 70½ or older to be eligible to make a QCD.
QCDs are limited to the amount that would otherwise be taxed as ordinary income. This excludes non-deductible contributions.
The maximum annual amount that can qualify for a QCD is $100,000. This applies to the sum of QCDs made to one or more charities in a calendar year. (If, however, you file taxes jointly, your spouse can also make a QCD from his or her own IRA within the same tax year for up to $100,000.)
For a QCD to count towards your current year’s MRD, the funds must come out of your IRA by your MRD deadline, generally December 31.

Any amount donated above your MRD does not count toward satisfying a future year's MRD.

Funds distributed directly to you, the IRA owner, and which you then give to charity do not qualify as a QCD.

Under certain circumstances, a QCD may be made from a Roth IRA. Roth IRAs are not subject to MRDs during your lifetime, and distributions are generally tax-free. Consult a tax advisor to determine if making a QCD from a Roth is appropriate for your situation.

What kind of charities qualify?

The charity must be a 501(c)(3) organization, eligible to receive tax-deductible contributions.

Some charities do not qualify for QCDs:

Private foundations
Supporting organizations: i.e., charities carrying out exempt purposes by supporting other exempt organizations, usually other public charities
Donor-advised funds, which public charities manage on behalf of organizations, families, or individuals

Tax reporting

A QCD is reported as a normal distribution on IRS Form 1099-R for any non-Inherited IRAs. For Inherited IRAs or Inherited Roth IRAs, the QCD will be reported as a death distribution. Itemization is not required to make a QCD. While the QCD amount is not taxed, you may not then claim the distribution as a charitable tax deduction.

A QCD is not subject to withholding. State tax rules may vary, so for guidance, consult a tax advisor.

When making a QCD, you must receive the same type of acknowledgement of the donation that you would need to claim a deduction for a charitable contribution.

A tax advisor can help you determine if both your IRA and charity qualify for QCDs.

QCD from an IRA.

fmpestorius — Mon, 20 Jan 2020 18:30:38 GMT

I received my form 1099-R from my IRA custodian. I had directed that contributions of $2k each to my church and to a college be made directly from my RMD. These contributions were made. I believe that these were QCDs. My form 1099-R box 1 Gross Distribution shows $6085.15, my block 2a Taxable amount shows the SAME amount. The block 4 is $417.03, the tax on the distribution balance after the QCDs at 20%. How do I lower the block 2a Taxable amount, to show these QCDs??

Re: QCD from an IRA.

MaryK4 — Mon, 20 Jan 2020 20:37:44 GMT

After you enter your 1099-R entry, there are followup questions-

Did You Inherit the IRA from This Payer?
About This Retirement Account
- Was this withdrawal an RMD for 2019?
Transfer To Charity? This is where you can enter the amount and TurboTax will exclude the income.

@fmpestorius

Re: QCD from an IRA.

yazzy55 — Thu, 09 Apr 2020 16:02:32 GMT

Why doesn't my version of TurboTax ask me "Tell us about this IRA" when I enter my 1099. I have made a Qualified Charitable Distribution and can't enter it.

Re: QCD from an IRA.

BillM223 — Thu, 09 Apr 2020 16:09:28 GMT

How old are you? TurboTax will not ask the question if you were not at least 70 1/2 in 2019, because taxpayers younger than that are not qualified to make a QCD.

Re: Is there a tax advantage to take out more rmd than required

Shady2218 — Wed, 02 Dec 2020 20:39:31 GMT

Because RMDs are a large part of our income, with no required RMDs for 2020, our income dropped considerably -- to a lower bracket. A test 2020 tax return indicated $4000. could be taken with no tax ramification. However, indications are more can be withdrawn, but it must be withdrawn prior to 12/31. Really need the investment section of Turbo asap to take advantage of a further tax-free RMD for 2020.

Re: Is there a tax advantage to take out more rmd than required

macuser_22 — Wed, 02 Dec 2020 21:10:22 GMT

@Shady2218 wrote:

Because RMDs are a large part of our income, with no required RMDs for 2020, our income dropped considerably -- to a lower bracket. A test 2020 tax return indicated $4000. could be taken with no tax ramification. However, indications are more can be withdrawn, but it must be withdrawn prior to 12/31. Really need the investment section of Turbo asap to take advantage of a further tax-free RMD for 2020.

There is not RMD at all for 2020, but you can take a normal distribution if you want to.

Tax wise, an RMD is not different that ANY other IRA distribution, except that it is required. There is no difference in the tax between a RMD distribution and a normal distribution of the same amount.

I don't know what you mean by "no tax ramification". Any distribution is taxable and adds to your AGI and taxable income even if in a lower tax bracket. If you do not need the money, then I do not see the advantage of taking it out of the IRA. There is no "tax free RMD for 2020" since there is not RMD at all. The only thing that is tax free is not to take any distribution at all.

Re: Is there a tax advantage to take out more rmd than required

VolvoGirl — Wed, 02 Dec 2020 21:08:16 GMT

Since you don't have to take a RMD for 2020 and if you don't need the money and are in a low bracket you could convert some to a ROTH IRA. It will be taxable now but not when you take it out of the ROTH.