Question about qualified charitable distribution (QCD)

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LearningAlot
Posts: 45
Joined: Thu Aug 02, 2018 8:43 am

Question about qualified charitable distribution (QCD)

Post by LearningAlot »

I manage my mom's finances/taxes, she is in her RMD years and takes the minimum each year. She cannot itemize and
gives to charities each year. I discussed a QCD with her and she would like me to handle her primary charitable
contribution (her church) as a QCD in 2019. She has her traditional IRA with Schwab, so I'll work with them.

As I get into this, was wondering if anyone had any tips or traps I should be on the look out for as I work with Schwab.

Thanks in advance!
Silk McCue
Posts: 4825
Joined: Thu Feb 25, 2016 7:11 pm

Re: Question about qualified charitable distribution (QCD)

Post by Silk McCue »

Just make the QCD before you do any RMD. I’d you don’t it doesn’t consume the RMD/portion of the RMD. For my mom we have the check mailed directly to our church. No need to touch it. We have fhe church email us a copy of the check although that probable isn’t necessary. We pull the RMD after the QCD check is officially cut.

Cheers
jimcrawford01
Posts: 85
Joined: Mon May 19, 2008 5:23 pm

Re: Question about qualified charitable distribution (QCD)

Post by jimcrawford01 »

Not an expert here but just did QCD for first time after turning 70 1/2 in JUL 2018 and RMD due NLT end of 2018. Learned a lot.

1. Ensure that you are OVER 70 1/2 to the DAY for the QCD.

2. Take QCD FIRST, prior to RMD. Easy to do. Call Vanguard (easy to do online, if desired) and they can mail a check directly to Charity OR to you to pass on to the Charity. Check will be in the name of the Charity.

Great way to give tax efficiently. Allow 2 weeks + for all this.

3. Take the Remainder of your RMD (RMD - QCD). You may take more, if you wish, but I will let others address that option.

4. I had questions re the check NOT being cashed (lost in mail, etc). The $$ will have come out of your IRA (and cannot go back) but did NOT arrive at the Charity BUT did NOT go into your pocket either. So, where is the $$? It is contained in the check. Vanguard assured me several times that the check can be CXed or Replaced at no cost. Simply notify Vanguard and instruct what to do.

5. Take photos of check and/or keep statements that can verify what you did, just in case.

Jim
tomd37
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Joined: Thu Mar 01, 2007 10:39 pm
Location: Middle Tennessee

Re: Question about qualified charitable distribution (QCD)

Post by tomd37 »

I am with Vanguard and have been taking QCDs for the past ten years in those years that the QCDs were available. I totally agree with the comment about taking your QCD in advance of the RMD. I make QCD contributions to nine organizations each year. Although I can complete the QCD request online at the Vanguard site, I prefer to email my representative a list of the qualified charitable organizations the day before our telephone conversation. That way the rep has all the details and can quickly and easily process my request. I have the checks mailed to me and then send them to the charitable organization with a cover letter indicating an "in memory of" annual donation.

As you probably know the amount of your QCD is not taxable income on the IRS Form 1040, but you will receive a Form 1099-R from your investment company for the full amount of your RMD distribution and it is up to you to report the amounts correctly on the 1040.

With the new changes in tax law for 2018 and the doubling of the standard deduction and removal of most exemptions (personal and dependent), fewer people will be itemizing deductions. QCDs play an increasing role in the reduction of taxable income. As part of the AARP Foundation Tax Counseling for the Elderly (TCE) free tax preparation service, I will encourage certain clients to find out more about the QCD program. I cannot give financial advice in the program, but I can suggest the client look into the matter if interested.

Just a reminder that the person making the QCD must have reached the age of 70.5 before the distribution can be counted as a QCD. (not a day earlier).

JimCrawford added some great comments as I was typing my reply and I totally agree with him and do all he mentions.
Tom D.
willift
Posts: 90
Joined: Wed Apr 28, 2010 4:25 pm

Re: Question about qualified charitable distribution (QCD)

Post by willift »

A timely article in the WSJ yesterday.
I'm gathering info on this topic, in the hopes of persuading my favorite charity to focus some of their fundraising efforts toward this great tax saving section of the IRS Code. Any success stories would be appreciated

https://blogs.wsj.com/experts/2018/11/2 ... -and-rmds/
btenny
Posts: 5438
Joined: Sun Oct 07, 2007 6:47 pm

Re: Question about qualified charitable distribution (QCD)

Post by btenny »

Beware pushing your Total Income over the limits for High Income individuals when taking RMDs. The issue is a substantially raise in Medicare Insurance costs if you go over a income limit of $170K (MFJ) or $85K (single). So I suggest you evaluate your overall tax situation before planning how much to give via QCD. In many cases you can give enough $$ via QCD to reduce you Total Income below the levels for a insurance cost increase. See the article below.

https://money.usnews.com/money/retireme ... es-in-2018

Good Luck.
AlwaysaQ
Posts: 600
Joined: Fri Apr 13, 2007 7:37 am

Re: Question about qualified charitable distribution (QCD)

Post by AlwaysaQ »

As long as no more than the RMD is taken does it really matter if QCDs are first, last, or in the middle?
Gretchen
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Location: Southern CA

Re: Question about qualified charitable distribution (QCD)

Post by Gretchen »

DH turned 70 1/2 this year, and I submitted the paperwork to his Fidelity IRA for the year's major charitable distributions just a few days later. Everything went off without a hitch.

The only wrinkle would have been if we'd wanted to put more than $10K on a single form (we didn't). At that point, Fidelity has an extra requirement for, IIRC, a Medallion signature.
sport
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Location: Cleveland, OH

Re: Question about qualified charitable distribution (QCD)

Post by sport »

AlwaysaQ wrote: Wed Nov 21, 2018 1:03 pm As long as no more than the RMD is taken does it really matter if QCDs are first, last, or in the middle?
No, it does not matter. The first withdrawals from the account(s) are the RMD, until the RMD is satisfied. QCDs can be any part of the RMD. In fact, you can even make QCDs after the RMD is complete, but they will not be part of the RMD and will not provide any tax reduction for that year. In that case, they would be tax free withdrawals and would reduce your account balance.
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CABob
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Location: Southern California

Re: Question about qualified charitable distribution (QCD)

Post by CABob »

sport wrote: Wed Nov 21, 2018 1:22 pm
AlwaysaQ wrote: Wed Nov 21, 2018 1:03 pm As long as no more than the RMD is taken does it really matter if QCDs are first, last, or in the middle?
No, it does not matter. The first withdrawals from the account(s) are the RMD, until the RMD is satisfied. QCDs can be any part of the RMD. In fact, you can even make QCDs after the RMD is complete, but they will not be part of the RMD and will not provide any tax reduction for that year. In that case, they would be tax free withdrawals and would reduce your account balance.
It sounds to me as if it does matter if you want the withdrawal to be a QCD and not taxed rather than a normal withdrawal. Any withdrawal after the RMD I believe would be taxed.
Bob
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BL
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Re: Question about qualified charitable distribution (QCD)

Post by BL »

You can do a QCD of up to 100k/year and it will not be taxed. It will be recorded on your 1040 from your 1099 but it is not added to the AGI amounts which is what you pay tax on.

If QCD is done after RMDs, it does not help with tax on RMDs, but still is not taxable but reduces your IRA balance.

We do all QCD; the first $X fills the requirement for RMD, and any extra gets reported (box a.) but not taxed on 1040. (the letters QCD are written to the left of (box b.) taxable amount which would be $0 in our case.)
RetiredCSProf
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Re: Question about qualified charitable distribution (QCD)

Post by RetiredCSProf »

You can choose to have the check mailed to the charity or to the owner of the account. If the check is sent from the brokerage to the account owner, the account owner can add a note with the check to the charity, such as "in memory of .." or "in celebration of ..."

For the tax return, you need only the forms generated by the brokerage. In the event of an audit, the account owner needs records of each donation that is $250 or higher. Charities will provide a receipt of donations of $250 or more, but only if they have the address of the account owner who made the donation.

Checks mailed directly from the brokerage to the charity do not include the address of the account owner. Not a problem if the donation is less than $250 or is to a local charity, such as your church, where they already have the address so that they can send a receipt for the donation.
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