What is the advantage of directing an RMD to a cha...
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New Member

What is the advantage of directing an RMD to a charity when the 1099 shows the full amount of distribution

 
7 Replies
Employee Tax Expert

What is the advantage of directing an RMD to a charity when the 1099 shows the full amount of distribution

Line 4a on you 1040 will show the full amount reported on the 1099-R.

 

Line 4b should show only the taxable amount (i.e., the total distributions from all IRAs less the QCD). This is the benefit of a QCD because your taxable income is reduced.

 

Note that you are allowed to make excluded QCD distributions only if you are at least 70 1/2 by the end of the tax year.

 

Also note that you can make QCD distributions only from a traditional or inherited IRA. 

 

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Level 15

What is the advantage of directing an RMD to a charity when the 1099 shows the full amount of distribution

And to be a QCD the charitable contribution must be paid directly from the IRA to the charity.  A distribution paid to you that you later you use to make a charitable contribution is reportable on Schedule A, not as a QCD, and may or may not reduce your tax liability depending on the total of your itemized deductions. relative to the standard deduction.

New Member

What is the advantage of directing an RMD to a charity when the 1099 shows the full amount of distribution

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Employee Tax Expert

What is the advantage of directing an RMD to a charity when the 1099 shows the full amount of distribution

According to our Champion Maglib, he/she states that "The Form 1099-R will report a regular distribution regardless of a QCD.  The financial institutions normally does not indicate that the distribution was transferred to charity.  When entering this Form 1099-R into Turbotax, there will be questions related to the amount donated directly to charity. Turbotax will exclude this amount from Form 1040 line 15b or Form 1040A line 11b and will include the notation "QCD" next to the line."

 

After you enter your 1099-R, there will be a follow-up screen that asks Do any of these situations apply to you? Here you will choose I transferred all or part of this money directly to charity.  I hope this helps.

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Level 15

What is the advantage of directing an RMD to a charity when the 1099 shows the full amount of distribution

Also note that not all states recognize QCD's, so you may still owe state taxes on the distribution.

Level 15

What is the advantage of directing an RMD to a charity when the 1099 shows the full amount of distribution

The best reason to do the QCD is that it reduces your income BEFORE the calculation of the taxable SS benefits ... waiting to deduct it on the Sch A is not the best option. 

Level 15

What is the advantage of directing an RMD to a charity when the 1099 shows the full amount of distribution

And because that lowers your AGI, it doesn't affect the percent of your Soc Sec benefits that are subject to taxes.  Also, you are less likely to be hit with additional Medicare premiums 2 years down the road.

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