The SECURE Act and QCDs

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veggivet
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The SECURE Act and QCDs

Post by veggivet »

The SECURE Act pushed back RMDs from 70 1/2 to 72, as we know, but they didn't change the rules on QCDs, which still start at 70 1/2. Is there any advantage to using QCDs during this 18 month span, other than reducing the size (without incurring taxes) of your retirement accounts, and thus, your RMDs?
One further question: why aren't QCDs indexed to inflation? Thanks in advance.
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dodecahedron
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Re: The SECURE Act and QCDs

Post by dodecahedron »

veggivet wrote: Tue Mar 03, 2020 6:36 am Is there any advantage to using QCDs during this 18 month span, other than reducing the size (without incurring taxes) of your retirement accounts, and thus, your RMDs?
For me there is (or rather, I should say, I expect there will be, since I am still over 4 years away from 70 1/2.)

I currently make significant charitable donations by donating appreciated equities to my DAF and itemizing deductions. My deductions are currently constrained by the 30% of AGI rule and I have to deal with carryovers, etc.

Once I reach 70 1/2, I expect that making my large donations by QCD will be more tax efficient than donating appreciated securities and deducting on Schedule A. So my plan is to start using QCDs, stop itemizing, and start claiming the standard deduction that year. I expect that I will still have a balance remaining in my DAF that can be used for small donations, but plan to make all large ones via QCDs after that point.

I like the idea of simplifying my taxes as I grow older. I am aware that at some point my designated POA may have to take over filing my tax returns for me. More generally, my hope is to streamline and simplify my entire financial life to make the eventual handoff process as ¨turnkey¨ as possible. Even if it turns out that I do not need her assistance during my lifetime, my executor will likely need to file a final tax return after my death. Making that final return tax efficient yet as simple as possible (no Schedule A, no carryovers, etc.) is my hope.
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BolderBoy
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Re: The SECURE Act and QCDs

Post by BolderBoy »

veggivet wrote: Tue Mar 03, 2020 6:36 amIs there any advantage to using QCDs during this 18 month span, other than reducing the size (without incurring taxes) of your retirement accounts, and thus, your RMDs?
There may be for some folks.

I agree with what dodecahedron said. In addition there are those who are trying to limit the effects of the IRMAA on Medicare premiums.

Look at your AGI as "the line". Deductions which can be taken "above the line" are generally worth more than those "below the line". QCDs are taken above the line. Charitable contributions are applied on Schedule A, which is a below the line deduction.
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House Blend
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Re: The SECURE Act and QCDs

Post by House Blend »

veggivet wrote: Tue Mar 03, 2020 6:36 am The SECURE Act pushed back RMDs from 70 1/2 to 72, as we know, but they didn't change the rules on QCDs, which still start at 70 1/2. Is there any advantage to using QCDs during this 18 month span, other than reducing the size (without incurring taxes) of your retirement accounts, and thus, your RMDs?
If you have a pre-SECURE Act inherited non-spousal IRA, those still have RMDs.

So it can make sense to do QCDs from such IRAs once you are age 70.5.

It could also make sense if you have a post-SECURE Act inherited IRA whose 10 year distribution clock is winding down.
BolderBoy wrote: Tue Mar 03, 2020 9:54 am In addition there are those who are trying to limit the effects of the IRMAA on Medicare premiums.

Look at your AGI as "the line". Deductions which can be taken "above the line" are generally worth more than those "below the line". QCDs are taken above the line. Charitable contributions are applied on Schedule A, which is a below the line deduction.
If you don't have an existing inherited IRA, then you won't have RMDs until age 72. As a result, a QCD at age 70.5 would have no effect on AGI or IRMAA premiums, other than the fact (as noted by the OP) that it will reduce future RMDs.

On the other hand, perhaps you don't "need" any of your trad IRA, and your plan is to QCD all of your RMDs, and name one or more charities as the beneficiaries. In that case, it makes perfect sense to begin QCDs at 70.5. Perhaps even max them out and drain the account sooner, if you think that makes sense for the charity.

For folks whose approach to charity is more along the lines of "I'm going to need $X this year from my IRA, and anything above that in my RMD is going to get donated", then I think it makes the most sense to wait until you actually have RMDs before using QCDs.
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Re: The SECURE Act and QCDs

Post by Alan S. »

Not the same issue, but the Secure Act also authorized making deductible TIRA contributions without an age limit.

However, if you are planning QCDs be aware of the punitive anti abuse rule for the deductible contributions that states that any deductible TIRA contributions made for the age 70 year or later will result in a dollar for dollar reduction of your QCD. This is meant to prevent churning of contributions and QCDs for a net tax break, however it is overly punitive because you could have a 7 figure TIRA to fund your QCDs and the current contribution is miniscule in relation to that amount of QCD potential.

In any event, because of this rule, if you plan on using QCDs, best to avoid making these deductible contributions after age 69 so your QCDs will not be reduced and turned into partial QCDs and partial pre QCD donations. Make Roth contributions instead.
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veggivet
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Re: The SECURE Act and QCDs

Post by veggivet »

Thank you, Alan S. for that valuable information. I wasn't aware of the dollar for dollar reduction. Very much appreciate you taking the time to respond in what must be a very busy time of year for you.
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Re: The SECURE Act and QCDs

Post by MathWizard »

In most cases, given the current tax law (high standard deduction, limitations on state and local tax deductions)
retirees will not be itemizing in retirement. Maybe that is not true on this board where people have significant assets,
but it certainly fits me.

If you are already giving to an eligible charity, and do not itemize, you do not get a deduction for that.
If instead you use QCDs (as soon as they are available) for some or all of it, it is not
counted as income, so it is like getting a deduction for charitable contributions even though you
use the standard deduction. I wish I could do that now, but I am too young.

The fact that it can count as part of your RMD when that is required is just a bonus.

If you do not already make charitable contributions, QCDs provide no advantage.
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Re: The SECURE Act and QCDs

Post by Zoey »

My husband who turns 701/2 this year has a non spousal inherited IRA (he has been taking RMD’s) and a TIRA. Can he take QCD’s from either of them this year without tax consequences?
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Re: The SECURE Act and QCDs

Post by trueblueky »

veggivet wrote: Tue Mar 03, 2020 6:36 am One further question: why aren't QCDs indexed to inflation? Thanks in advance.
The limit on QCD is $100,000. If that's not enough, buy a Member of Congress. ☺
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David Jay
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Re: The SECURE Act and QCDs

Post by David Jay »

Zoey wrote: Wed Mar 04, 2020 3:24 pm My husband who turns 70 1/2 this year has a non spousal inherited IRA (he has been taking RMD’s) and a TIRA. Can he take QCD’s from either of them this year without tax consequences?
Yes, but note that the QCD age rule is slightly different than the old RMD rule - one can only make QCDs after the age of 70.5 (not "in the year" that one turns 70.5). Your husband must actually be 70.5 when he makes the QCD.
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Re: The SECURE Act and QCDs

Post by Zoey »

David Jay..thanks! Just so I understand..hubby turned 70 in October of 2019. So he can do a QCD AFTER April of this year with no taxes.
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House Blend
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Re: The SECURE Act and QCDs

Post by House Blend »

MathWizard wrote: Wed Mar 04, 2020 12:28 pm I If you are already giving to an eligible charity, and do not itemize, you do not get a deduction for that.
If instead you use QCDs (as soon as they are available) for some or all of it, it is not
counted as income, so it is like getting a deduction for charitable contributions even though you
use the standard deduction. I wish I could do that now, but I am too young.

The fact that it can count as part of your RMD when that is required is just a bonus.
You may call it a bonus, but it is significant enough IMO that in the years before one takes RMDs, many Bogleheads with charitable goals would be well served by bunching donations in large chunks to a Donor Advised Fund (so one can itemize and deduct at least some of the donations), and then switch to QCDs once RMDs have begun.
If instead you use QCDs (as soon as they are available) for some or all of it, it is not
counted as income, so it is like getting a deduction for charitable contributions even though you use the standard deduction.
No. If you are eligible for QCDs and not taking RMDs (which is what this thread is about), it is not
at all like that. All the the QCD does is put your trad IRA on roughly equal footing with donations of cash or appreciated securities for a non-itemizing taxpayer.
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David Jay
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Re: The SECURE Act and QCDs

Post by David Jay »

House Blend wrote: Wed Mar 04, 2020 5:34 pm
If instead you use QCDs (as soon as they are available) for some or all of it, it is not
counted as income, so it is like getting a deduction for charitable contributions even though you use the standard deduction.
No. If you are eligible for QCDs and not taking RMDs (which is what this thread is about), it is not
at all like that. All the the QCD does is put your trad IRA on roughly equal footing with donations of cash or appreciated securities for a non-itemizing taxpayer.
I'm with MathWiz on this one.

Assume that I am taking living expense and charitable donation money from my tIRA. If my deductions are so limited that I use the standard deduction, taking that money out of my tIRA will incur taxes, both state and federal. When I make a charitable donation, I am donating after-tax money.

If I utilize a QCD I incur no taxes on that charitable money.
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Re: The SECURE Act and QCDs

Post by MtnBiker »

House Blend wrote: Wed Mar 04, 2020 5:34 pm
MathWizard wrote: Wed Mar 04, 2020 12:28 pm I If you are already giving to an eligible charity, and do not itemize, you do not get a deduction for that.
If instead you use QCDs (as soon as they are available) for some or all of it, it is not
counted as income, so it is like getting a deduction for charitable contributions even though you
use the standard deduction. I wish I could do that now, but I am too young.

The fact that it can count as part of your RMD when that is required is just a bonus.
You may call it a bonus, but it is significant enough IMO that in the years before one takes RMDs, many Bogleheads with charitable goals would be well served by bunching donations in large chunks to a Donor Advised Fund (so one can itemize and deduct at least some of the donations), and then switch to QCDs once RMDs have begun.
This is basically the approach I am taking. I am in the years prior to 70-1/2 and bunched several years of donations into one year to enable itemization so that some of the donation was deductible. At that point in time, my taxable account was exhausted except for a small emergency fund. Now all living expenses come from social security and traditional IRA withdrawals. The next year that I plan to do another bunched donation will be the year I reach 70-1/2, so the next major donation will be a QCD.
House Blend wrote: Wed Mar 04, 2020 5:34 pm
MathWizard wrote: Wed Mar 04, 2020 12:28 pmIf instead you use QCDs (as soon as they are available) for some or all of it, it is not
counted as income, so it is like getting a deduction for charitable contributions even though you use the standard deduction.
No. If you are eligible for QCDs and not taking RMDs (which is what this thread is about), it is not
at all like that. All the the QCD does is put your trad IRA on roughly equal footing with donations of cash or appreciated securities for a non-itemizing taxpayer.
I am trying to reconcile your last statement in my mind. I guess you are saying that the QCD is roughly equivalent with donations drawn from a taxable account, since that can be done without a taxable event. But if your donation is only coming out of your trad IRA, then it seems always better to do so via QCD (regardless of whether taking RMDs).

EDIT: While I was writing this, DJ confirmed what I was thinking.
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Re: The SECURE Act and QCDs

Post by House Blend »

David Jay wrote: Wed Mar 04, 2020 6:44 pm
House Blend wrote: Wed Mar 04, 2020 5:34 pm
If instead you use QCDs (as soon as they are available) for some or all of it, it is not
counted as income, so it is like getting a deduction for charitable contributions even though you use the standard deduction.
No. If you are eligible for QCDs and not taking RMDs (which is what this thread is about), it is not
at all like that. All the the QCD does is put your trad IRA on roughly equal footing with donations of cash or appreciated securities for a non-itemizing taxpayer.
I'm with MathWiz on this one.

Assume that I am taking living expense and charitable donation money from my tIRA.
So we are making different assumptions.

I agree that if, say, your options are to spend $10K from your cash bucket and do a $10K QCD, or donate $10K cash and draw $10K from your tIRA for expenses, the QCD is the better deal tax-wise.

However, for someone who does not itemize, does not (yet) have RMDs, and doesn't need to draw from the tIRA for expenses, donating cash or donating via QCD leave you in the same place tax-wise. (Aside from slightly smaller future RMDs.)
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David Jay
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Re: The SECURE Act and QCDs

Post by David Jay »

House Blend wrote: Wed Mar 04, 2020 8:58 pm
David Jay wrote: Wed Mar 04, 2020 6:44 pm
House Blend wrote: Wed Mar 04, 2020 5:34 pm
If instead you use QCDs (as soon as they are available) for some or all of it, it is not
counted as income, so it is like getting a deduction for charitable contributions even though you use the standard deduction.
No. If you are eligible for QCDs and not taking RMDs (which is what this thread is about), it is not
at all like that. All the the QCD does is put your trad IRA on roughly equal footing with donations of cash or appreciated securities for a non-itemizing taxpayer.
I'm with MathWiz on this one.

Assume that I am taking living expense and charitable donation money from my tIRA.
So we are making different assumptions.

I agree that if, say, your options are to spend $10K from your cash bucket and do a $10K QCD, or donate $10K cash and draw $10K from your tIRA for expenses, the QCD is the better deal tax-wise.

However, for someone who does not itemize, does not (yet) have RMDs, and doesn't need to draw from the tIRA for expenses, donating cash or donating via QCD leave you in the same place tax-wise. (Aside from slightly smaller future RMDs.)
Gotcha
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Re: The SECURE Act and QCDs

Post by Alan S. »

For the 1-2 years in which you can do a QCD prior to your first RMD distribution year, and if you are not itemizing, I agree that the QCD advantage over donation of after tax money is limited to:
1) Drawing down your TIRA, thus reducing future RMDs marginally
2) Concentrating any basis you may have in your TIRA, since the QCD comes solely from the pre tax balance.

And even if you are itemizing you could run into the % limitations, or your itemized deduction total does not exceed your standard deduction by the full amount donated.

It would be useful to consider deferring donations for a year or so until you reach your first RMD distribution year, then make a larger QCD to make up for the period you deferred donations. Also, if your RMDs will not start until 72, the added years of accumulation prior to distributions will make those annual RMDs larger, and QCDs would reduce the larger tax bills.
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Re: The SECURE Act and QCDs

Post by FIREchief »

House Blend wrote: Wed Mar 04, 2020 8:58 pm However, for someone who does not itemize, does not (yet) have RMDs, and doesn't need to draw from the tIRA for expenses, donating cash or donating via QCD leave you in the same place tax-wise. (Aside from slightly smaller future RMDs.)
I disagree. Let's say I want to donate $1000 to a charity. I have $100,000 in my tIRA and $100,000 in cash.

If I use a QCD, I now have $99,000 in my tIRA and $100,000 in cash.

If I donate cash, I now have $100,000 in my tIRA and $99,000 in cash.

As you suggest, for this tax year, there is no difference in taxes. However, upon comparing the relative effects, one strategy leaves me with $1000 more in cash and $1000 less in tIRA. That's the equivalent of having moved $1000 from tIRA to cash without paying any taxes. That's $1000 that would have been taxed at some point in the future but now will not be. 8-)
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Re: The SECURE Act and QCDs

Post by FIREchief »

MtnBiker wrote: Wed Mar 04, 2020 6:47 pm The next year that I plan to do another bunched donation will be the year I reach 70-1/2, so the next major donation will be a QCD.
How can you make a "bunched donation" via a QCD? Are you describing bunching several years of donations to an individual charity in a single tax year? How would that be any better than just making smaller QCD's every year? Is it just for convenience?
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Re: The SECURE Act and QCDs

Post by MathWizard »

FIREchief wrote: Thu Mar 05, 2020 1:33 pm
House Blend wrote: Wed Mar 04, 2020 8:58 pm However, for someone who does not itemize, does not (yet) have RMDs, and doesn't need to draw from the tIRA for expenses, donating cash or donating via QCD leave you in the same place tax-wise. (Aside from slightly smaller future RMDs.)
I disagree. Let's say I want to donate $1000 to a charity. I have $100,000 in my tIRA and $100,000 in cash.

If I use a QCD, I now have $99,000 in my tIRA and $100,000 in cash.

If I donate cash, I now have $100,000 in my tIRA and $99,000 in cash.

As you suggest, for this tax year, there is no difference in taxes. However, upon comparing the relative effects, one strategy leaves me with $1000 more in cash and $1000 less in tIRA. That's the equivalent of having moved $1000 from tIRA to cash without paying any taxes. That's $1000 that would have been taxed at some point in the future but now will not be. 8-)
I was writing something similar, but you stated it more concisely.
The key is that by using the QCDs, the future tax liability is reduced.

In my case, that will not matter, because I will need to withdraw from tax deferred to live. I'm not sure how many
people who contribute to tax deferred never plan to withdraw the money. If they don't why did they keep working?
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FIREchief
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Re: The SECURE Act and QCDs

Post by FIREchief »

MathWizard wrote: Thu Mar 05, 2020 1:39 pm
FIREchief wrote: Thu Mar 05, 2020 1:33 pm
House Blend wrote: Wed Mar 04, 2020 8:58 pm However, for someone who does not itemize, does not (yet) have RMDs, and doesn't need to draw from the tIRA for expenses, donating cash or donating via QCD leave you in the same place tax-wise. (Aside from slightly smaller future RMDs.)
I disagree. Let's say I want to donate $1000 to a charity. I have $100,000 in my tIRA and $100,000 in cash.

If I use a QCD, I now have $99,000 in my tIRA and $100,000 in cash.

If I donate cash, I now have $100,000 in my tIRA and $99,000 in cash.

As you suggest, for this tax year, there is no difference in taxes. However, upon comparing the relative effects, one strategy leaves me with $1000 more in cash and $1000 less in tIRA. That's the equivalent of having moved $1000 from tIRA to cash without paying any taxes. That's $1000 that would have been taxed at some point in the future but now will not be. 8-)
I was writing something similar, but you stated it more concisely.
The key is that by using the QCDs, the future tax liability is reduced.

In my case, that will not matter, because I will need to withdraw from tax deferred to live. I'm not sure how many
people who contribute to tax deferred never plan to withdraw the money. If they don't why did they keep working?
I believe it does still matter. By taking a $1000 QCD from your tIRA instead of after-tax, you've preserved an extra $1000 in after-tax for future living expenses. That means they will last $1000 longer before you have to withdraw from your tIRA to cover living expenses. Again, that's $1000 less life time tIRA withdrawal that would be taxed at ordinary income tax rates.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Re: The SECURE Act and QCDs

Post by Carl53 »

FIREchief wrote: Thu Mar 05, 2020 1:44 pm
MathWizard wrote: Thu Mar 05, 2020 1:39 pm
FIREchief wrote: Thu Mar 05, 2020 1:33 pm
House Blend wrote: Wed Mar 04, 2020 8:58 pm However, for someone who does not itemize, does not (yet) have RMDs, and doesn't need to draw from the tIRA for expenses, donating cash or donating via QCD leave you in the same place tax-wise. (Aside from slightly smaller future RMDs.)
I disagree. Let's say I want to donate $1000 to a charity. I have $100,000 in my tIRA and $100,000 in cash.

If I use a QCD, I now have $99,000 in my tIRA and $100,000 in cash.

If I donate cash, I now have $100,000 in my tIRA and $99,000 in cash.

As you suggest, for this tax year, there is no difference in taxes. However, upon comparing the relative effects, one strategy leaves me with $1000 more in cash and $1000 less in tIRA. That's the equivalent of having moved $1000 from tIRA to cash without paying any taxes. That's $1000 that would have been taxed at some point in the future but now will not be. 8-)
I was writing something similar, but you stated it more concisely.
The key is that by using the QCDs, the future tax liability is reduced.

In my case, that will not matter, because I will need to withdraw from tax deferred to live. I'm not sure how many
people who contribute to tax deferred never plan to withdraw the money. If they don't why did they keep working?
I believe it does still matter. By taking a $1000 QCD from your tIRA instead of after-tax, you've preserved an extra $1000 in after-tax for future living expenses. That means they will last $1000 longer before you have to withdraw from your tIRA to cover living expenses. Again, that's $1000 less life time tIRA withdrawal that would be taxed at ordinary income tax rates.
+1
MathWizard
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Re: The SECURE Act and QCDs

Post by MathWizard »

FIREchief wrote: Thu Mar 05, 2020 1:44 pm
MathWizard wrote: Thu Mar 05, 2020 1:39 pm
FIREchief wrote: Thu Mar 05, 2020 1:33 pm
House Blend wrote: Wed Mar 04, 2020 8:58 pm However, for someone who does not itemize, does not (yet) have RMDs, and doesn't need to draw from the tIRA for expenses, donating cash or donating via QCD leave you in the same place tax-wise. (Aside from slightly smaller future RMDs.)
I disagree. Let's say I want to donate $1000 to a charity. I have $100,000 in my tIRA and $100,000 in cash.

If I use a QCD, I now have $99,000 in my tIRA and $100,000 in cash.

If I donate cash, I now have $100,000 in my tIRA and $99,000 in cash.

As you suggest, for this tax year, there is no difference in taxes. However, upon comparing the relative effects, one strategy leaves me with $1000 more in cash and $1000 less in tIRA. That's the equivalent of having moved $1000 from tIRA to cash without paying any taxes. That's $1000 that would have been taxed at some point in the future but now will not be. 8-)
I was writing something similar, but you stated it more concisely.
The key is that by using the QCDs, the future tax liability is reduced.

In my case, that will not matter, because I will need to withdraw from tax deferred to live. I'm not sure how many
people who contribute to tax deferred never plan to withdraw the money. If they don't why did they keep working?
I believe it does still matter. By taking a $1000 QCD from your tIRA instead of after-tax, you've preserved an extra $1000 in after-tax for future living expenses. That means they will last $1000 longer before you have to withdraw from your tIRA to cover living expenses. Again, that's $1000 less life time tIRA withdrawal that would be taxed at ordinary income tax rates.
Sorry, the "it does not matter" was that in my case the tax liability was already actual, not just potential, since I need to withdraw money from tax deferred to live, and HouseBlend had agreed that in that case QCDs meant less tax liability.

This was poor working on my part, and you of course are correct.
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Re: The SECURE Act and QCDs

Post by MarkerFM »

MathWizard wrote: Thu Mar 05, 2020 1:39 pm
FIREchief wrote: Thu Mar 05, 2020 1:33 pm
House Blend wrote: Wed Mar 04, 2020 8:58 pm However, for someone who does not itemize, does not (yet) have RMDs, and doesn't need to draw from the tIRA for expenses, donating cash or donating via QCD leave you in the same place tax-wise. (Aside from slightly smaller future RMDs.)
I disagree. Let's say I want to donate $1000 to a charity. I have $100,000 in my tIRA and $100,000 in cash.

If I use a QCD, I now have $99,000 in my tIRA and $100,000 in cash.

If I donate cash, I now have $100,000 in my tIRA and $99,000 in cash.

As you suggest, for this tax year, there is no difference in taxes. However, upon comparing the relative effects, one strategy leaves me with $1000 more in cash and $1000 less in tIRA. That's the equivalent of having moved $1000 from tIRA to cash without paying any taxes. That's $1000 that would have been taxed at some point in the future but now will not be. 8-)
I was writing something similar, but you stated it more concisely.
The key is that by using the QCDs, the future tax liability is reduced.

In my case, that will not matter, because I will need to withdraw from tax deferred to live. I'm not sure how many
people who contribute to tax deferred never plan to withdraw the money. If they don't why did they keep working?
I'll answer your question because I fit in this group. Our plan is to donate all RMDs by doing QCDs where possible and upon the second death donate all tax-deferred accounts to a DAF. Things changed between the time our tax-deferred accounts were nearly 100% of net worth to now when they are 10%. The stop working part happened quickly when the taxable part of net worth got a big nudge from the sale of my companies.
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Re: The SECURE Act and QCDs

Post by MtnBiker »

FIREchief wrote: Thu Mar 05, 2020 1:38 pm
MtnBiker wrote: Wed Mar 04, 2020 6:47 pm The next year that I plan to do another bunched donation will be the year I reach 70-1/2, so the next major donation will be a QCD.
How can you make a "bunched donation" via a QCD? Are you describing bunching several years of donations to an individual charity in a single tax year? How would that be any better than just making smaller QCD's every year? Is it just for convenience?
My planned "bunched donation" via a QCD in the first year is simply a deferred donation from the year prior when a QCD is not allowed. Similar to what Alan S. mentioned earlier:
It would be useful to consider deferring donations for a year or so until you reach your first RMD distribution year, then make a larger QCD to make up for the period you deferred donations.
But in my case, I am simply considering deferring a donation for one year until I reach my first QCD year, then making one larger QCD to make up the year that I deferred.

As background, I am presently, prior to RMD age, withdrawing annually from my tIRA an amount equal to my anticipated annual (RMD - QCD), an amount which is necessary for normal living expenses. I expect there will be no significant difference for us financially when RMDs start; it will just be carrying on business as usual. I already Roth converted to the point where, in my cash flow plan, the taxable portion withdrawn each year (RMD - QCD) is expected to be essentially level throughout retirement (in real $) and is comfortably within the 12/15% federal bracket (as long as filing MFJ).
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FIREchief
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Re: The SECURE Act and QCDs

Post by FIREchief »

MtnBiker wrote: Thu Mar 05, 2020 7:13 pm
FIREchief wrote: Thu Mar 05, 2020 1:38 pm
MtnBiker wrote: Wed Mar 04, 2020 6:47 pm The next year that I plan to do another bunched donation will be the year I reach 70-1/2, so the next major donation will be a QCD.
How can you make a "bunched donation" via a QCD? Are you describing bunching several years of donations to an individual charity in a single tax year? How would that be any better than just making smaller QCD's every year? Is it just for convenience?
My planned "bunched donation" via a QCD in the first year is simply a deferred donation from the year prior when a QCD is not allowed. Similar to what Alan S. mentioned earlier:
It would be useful to consider deferring donations for a year or so until you reach your first RMD distribution year, then make a larger QCD to make up for the period you deferred donations.
But in my case, I am simply considering deferring a donation for one year until I reach my first QCD year, then making one larger QCD to make up the year that I deferred.

As background, I am presently, prior to RMD age, withdrawing annually from my tIRA an amount equal to my anticipated annual (RMD - QCD), an amount which is necessary for normal living expenses. I expect there will be no significant difference for us financially when RMDs start; it will just be carrying on business as usual. I already Roth converted to the point where, in my cash flow plan, the taxable portion withdrawn each year (RMD - QCD) is expected to be essentially level throughout retirement (in real $) and is comfortably within the 12/15% federal bracket (as long as filing MFJ).
Thanks. That all makes sense. I currently have my DAF funded at a level that "should" make it last until I reach 70 1/2 (invested in US TMI so who knows??). If it runs out a year early, I might use your approach and just delay a year's worth of donations and double-up my planned annual charitable contributions upon reaching 70 1/2. Also, to clarity, I am aware that I can't use QCD's to refund the DAF; I'll convert to an annual QCD direct to each charity.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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veggivet
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Re: The SECURE Act and QCDs

Post by veggivet »

Excellent information, everybody. Thank you very much!
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