ROBERT H from FL posted over 2 years ago:

Just to clarify…if I am required to withdraw $50,000 as my RMD from my IRA and I decide to give $10,000 to a charity as a QCD; I would only pay income tax on the balance of $40,000 and I would have meet my $50,000 RMD correct? Thanks.

CHARLES R from IL posted over 2 years ago:

Hi Robert, If you first do the QCD, then your taxable income related to the RMD will only be $40,000. So, you are diverting $10,000 of what would have been a mandatory taxable distribution to charity.

-Charles

JANET H from CT posted over 2 years ago:

Can a QCD be made from an IRA that has been rolled over from a 401K and still qualify as counting towards your RMD?

PETER B from NJ posted over 2 years ago:

If you live in a state that imposes an income tax, check whether and how it recognizes QCDs. They may be considered taxable income. Consider New Jersey (NJ). An IRA consists of original contributions, possibly rollovers from 401(k)/etc. plans, and investment growth. NJ already taxed the original contributions when they were made, so they are not taxed again. Rollovers and growth are considered taxable income. That likely means almost all the QCD will be taxable income. This does not change the many benefits described in the article, but it is a consideration in at least some states. State estimated tax payments may be needed to avoid an underpayment penalty due to the QCD.

JOHN C from MA posted over 2 years ago:

Plese clarify the question from Robert H and the answer from Charles. Assume my total RMD amount for the year is $50k and I first take a $40k distribution (RMD income) and then do $10k as QCD. I have now met my $50k RMD for the year. is the $10k QCD non-taxable? If I REVERSED the order -- first did the $10k QCD followed by the $40k RMD distribution. So I have met my RMD for the year. Is that treated differently tax wise?

CHARLES R from IL posted over 2 years ago:

John, Here's the example Brian gave in the article:

Tanya withdrew a total of $10,000 from her traditional IRA, $5,000 of which is current taxable income because the RMD was taken before the QCD. However, since the $5,000 distribution taken in December was transferred directly to a qualifying charity, it qualifies as a QCD and is thus excluded from taxable income.

In this example, the first distribution was the RMD and was taxable. The QCD in this case did fulfill the RMD. Had Tanya reversed the order, RMD would have been fulfilled. Either way, the QCD is excluded from taxable income.

-Charles

R W from PA posted over 2 years ago:

I have often been encouraged to utilize a QCD as a way to save on taxes, but I have yet to understand why a QCD is anymore helpful than itemizing the charitable donation. As I see it, taxes will be paid on $40,000 as the remaining RMD following a QCD of $10,000, or taxes will be paid on the taxable income following the $10,000 deduction of a charitable donation from an RMD of $50,000, which is the same $40,000. Am I correct in this assumption of equivalency?

RICHARD G from CO posted over 2 years ago:

RG from Colorado My RMD is $80,000 . I generally take RMD withdrawals during the year, and then "round out" to $80,000 total in December with QCD contributions. Turbo Tax software only requires: 1. The total amount taken out of my IRA, and 2. The amount given to a qualified charity, not the order in which the withdrawals are taken. As I understand, the QCD or RMD can be taken out in any order, but a QCD taken after the RMD minimum has been satisfied does not qualify as a charitable deduction.

JOHN C from MA posted over 2 years ago:

I still find this confusing. It was always my assumption that ANY QCD taken is EXCLUDED from taxable income. Regardless of whether I have met my RMD for the year. Please clarify. Taking Richard G example. If his RMD is $80k and he takes $80k in distributions during the year. He subsequently makes QCD directly to a charity of $10k during the year. His total distributions during the year are now $90k. of which only $80k is taxable. and this is true regardless of whether he made the $10k QCD distribution first and then the $80k "normal" distribution. Of course,, if he had taken $70k in "normal" distribution and then $10k in QCD (total of $80k). his taxable income would only be $70k. This is true regardless of whether he made the $10 QCD first OR last.

MIKE C from SC posted over 2 years ago:

I’m confused. As long as the QCD plus the IRA distribution add up to the RMD in a given year does the sequence make a difference?

P B from FL posted over 2 years ago:

I was a director and CFO for my employer. After our board meetings directors were paid the meeting income each December and the income was reported to me on a 1099 annually. I set up a Simple IRA retirement plan, was the only employee in the plan and tax sheltered most of this income which has accumulated to over $355,000. The May article mentions “QCD Tip”, that QCDs are only permitted from IRAs, including inherited IRAs. The article mentions QCDs cannot be done from an employer-sponsored retirement plan- ie, 401(k), 403(b), 457(b), etc. The Simple IRA was an employer retirement plan but is an IRA, so the question begs asking: can I make QCDs from my Simple IRA or must I rollover the Simple IRA funds into my Vanguard Rollover IRA brokerage account then make QCDs. I turn 70 next year and would like to begin making QCD distributions to our church mid-November 2025 as we do not have enough itemized deductions for schedule A versus the standard deduction.

DAVE G from TX posted over 2 years ago:

John C. "Plese clarify the question from Robert H and the answer from Charles. Assume my total RMD amount for the year is $50k and I first take a $40k distribution (RMD income) and then do $10k as QCD. I have now met my $50k RMD for the year. is the $10k QCD non-taxable? If I REVERSED the order -- first did the $10k QCD followed by the $40k RMD distribution. So I have met my RMD for the year. Is that treated differently tax wise? It makes absolutely NO difference in which order you do the transaction. I agree the article is a little confusing, but you just have to know that QCDs are always non-taxable, as long as you meet the age and dollar limit qualifications. Whether they count towards your RMD is only a matter of whether you withdraw other RMD funds you need to spend. In this example the RMD was $50k so any combination of QCD & RMD that equals $50k, in whatever order you want will satisfy this condition.

DAVE G from TX posted over 2 years ago:

MIKE C. See my answer above -- NO, the order does not matter. So, let's clarify the Tanya example with the correct initial conditions. If the initial conditions are that Tanya withdrew the $5k in Feb because she needed the money and she did the $5k QCD because she wanted to donate to the charity AND her RMD was $5k, then it makes absolutely no difference in which order she does the two transactions. In fact, if next year her RMD requirement is $10k, she can cover the $10k RMD with the exact same two transactions in whatever order she wants. In other words, she can still cover $5k of her budget and donate $5k with a QCD and meet the $10k RMD.

DAVE G from TX posted over 2 years ago:

PB, If you have other Rollover IRA funds just do the QCDs from there. In most cases you can easily transfer SIMPLE IRA funds over to your other IRA and in most cases your Rollover IRA has a wealth of better funds than the employer SIMPLE IRA.

GENE B from WA posted over 2 years ago:

I'm turning 73 in July. If I take an RMD (or QCD) in March, does that qualify as an RMD or do I have to wait until August (or after I turn 73 in July) for the withdrawal to be considered part of my RMD? The essence of the question is does the 73 count for the tax year or is it the specific date of my turning 73?

GENE B from WA posted over 2 years ago:

There seems to be a lot of confusion about the wording of some of these answers. It seems to me the first funds drawn from an IRA are RMDs. The hang-up seems to be that AFTER you have met your RMD requirement, you cannot go back and decide that an earlier RMD withdrawal was a QCD. Unless you designate more than $105,000 as a QCD, the funds are not taxable whether you take them out as part of your RMD or after your RMD (as long as you meet the other requirements like being 70 1/2). Otherwise, why would one be able to take a QCD after 70 1/2 and before age 73 when no RMD is required?

VICTOR T from NJ posted over 2 years ago:

The last question is precisely my question. I'm 70 1/2 and not required to take a RMD but want to make a QCD. Do I qualify?

DAVID G from NJ posted over 2 years ago:

Thank you for the article. I turned 73 this year and took my entire RMD as a QCD. Understanding the first-dollar rule will help me going forward in case I do not use my QCD for the entire RMD. As someone who does not used any outside advisors, your information helps me to not make any major mistakes. I am a lifetime member of AAII. This article was worth my membership. David G.

CAROL P from MI posted over 2 years ago:

To clarify several of these questions: the advantage of a QCD is that it keeps your AGI low. It's not a question of taxability, it's a matter of keeping this number, which ripples through tax calculations as low as possible. It can impact state returns as well as federal, depending on the state. If you're watching IRMAA brackets, for example, this matters. If your RMD is $5000 and you use the whole amount for a QCD, your AGI will not include that $5000. If instead, you take a $5000 RMD out, and then later take additional $5000 as a QCD, your AGI will rise by only the $5000 that did not go to charity.

JAMES M from MT posted over 2 years ago:

Carol P, QCD may help me to control RMD withdrawal in future tax years. Looking forward with projected IRA returns, when I reach 80 years old (I’m 71), I may succeed in keeping the RMD required withdrawal in line with my income requirements. Above all, those who do QCD gifting should be thanked and celebrated.

STEPHEN R from CA posted over 2 years ago:

I think the article was poorly written with respect to the timing of the QCD. Several people have posted remarks indicating confusion. As I understand the law, it is not necessary that QCDs be taken before any taxable RMDs. But if you want to limit the total RMD to that which is required, you want the QCDs to be included before you reach your RMD limit. If you want to buy a Tesla and take a trip to Hawaii and give a specific amount to charity and the sum of all that exceeds your RMD requirement, you will pay tax on the funds withdrawn to pay for the Tesla and the trip to Hawaii, but you will still exclude the QCD from your AGI. So the timing only matters if you want to avoid exceeding the RMD requirement and you don't figure out how much you give to charity ahead of time.

DAVE G from TX posted over 2 years ago:

Victor T. You can take a QCD at any time after you turn 70.5, and as long as you follow the requirements for a QCD you will not be taxed on the money. HOWEVER, it is up to you to keep track of this for your taxes, as you will still get a 1099-R from your IRA custodian, and it is up to the person who does your taxes to show it as such when the 1040 is done, as there is typically no special marking on the 1099-R that indicates it isn't taxable!!!!

DAVE G from TX posted over 2 years ago:

Gene B. Any money you withdraw from your TIRA account in the year you turn 73 or after will be considered an RMD, as will money that you "have sent" to a qualified charity. It is up to the person who does your taxes to separate them properly (for tax purposes) as they will typically both show up on the same 1099-R, if they are taken from the same account. That last sentence is very important and one reason why I take QCDs from one IRA custodian, and my withdrawals for RMDs or otherwise from a different account. It makes it easy to track.

DAVE G from TX posted over 2 years ago:

Gene B. Your second comment that implies the order you withdraw the money is important is what is confusing most people, because it really isn't. If you withdraw money you need to make it known to the custodian at the initial time you withdraw it that a check is to be made out directly to the charity. So certainly there is no way you can go back later after you have withdrawn the money and say it was for a QCD. If it IS a QCD you have to declare it at the time of withdrawal. When in the year you do this makes absolutely no difference as long as you are 70.5 or older at the time you do it.

DAVE G from TX posted over 2 years ago:

David G from NJ, As I have stated above just make sure whoever does your taxes knows that 1099-R (which will cover just the QCD, unless you withdraw more from your IRA) should be "tax-free." If you are the one doing the taxes and use tax software, most tax software will take care of this for you if you answer the questions correct pertaining to the 1099-R. The tell tale signs for anyone taking a QCD, is the word QCD on your 1040. On my 1040 the word QCD is in some white space between box 4a and box 4b, which describe the type of IRA distributions you took. If you don't see it there, there might be questions later from the IRS, or in the very worst case the software didn't withhold your QCD from box 4b and you got taxed on it!

DAVE G from TX posted over 2 years ago:

Steven R., Once again timing does NOT matter at all. In fact, let's drop the word RMD from this total discussion, until the very end and look at it this way. In the first place it is a good idea to have some sort of budget, which lets you know if you need IRA (TIRA) withdrawals to live on. In my case I set these up on a quarterly basis, but you could do monthly as well, or any schedule that suits you. These withdrawals are typically sent to your bank account which IMO is the saftest way to go, but a check could be sent to you as well. NONE of this money can ever be considered a QCD. If your plan is to donate to a 501c charity recognized by the IRS, what you need to do is declare that you want the withdrawal check paid to the charity at the time of withdrawal. Now if you have a budget you should know this number ahead of time. Even if you don't know these numbers hopefully you have a "retirement plan" so you don't spend more money than you can afford. So now December 1st rolls around and you pull out whatever document you have been tracking your withdrawals and QCD donations and you total both up. If the total from both is not greater than your RMD (I don't cut this to the penny so mine is always over) then you need to either withdraw more for you to spend or donate more via a QCD to make up the difference. Do not wait to the last week in Dec to do this. Last year I waited too long and did not factor in the 3-day clearing time to sell an investment and withdraw the money, so it turned out my tax due was a little higher, because the tax did not get withheld in the tax year I expected. I'm not of RMD age yet so amount I withdrew did not matter. As Mike C pointed out above, in the case of RMDs, you just need to make sure the amount you withdraw plus the amount that is sent to charities (direct check from IRA custodian) for QCD is greater than your RMD and you will be fine.

LARRY H from IA posted over 2 years ago:

To me it seems simpler to look at this situation as follows: If you have accounts to which MRD rules apply, then to avoid penalties you must withdraw during the year amounts which total at least the required amount. Generally, the accounts and withdrawals may be considered in the aggregate and the total amount withdrawn may be split in any way desired between QCD amounts and non-QCD amounts. However, at the time of each withdrawal it must be irrevocably designated as either a QCD or not a QCD. No one withdrawal transaction can be split and QCD amounts must be transferred directly from the financial institution to the recipient. The timing of the withdrawal transactions within the year and in relation to other withdrawal transactions does not matter.

LEWIS C from PA posted over 2 years ago:

I think it gets confusing when people need the money to spend vs NOT needing the money to spend. When you DON"T need the money to spend. RMD = 5,000 (or 50,000). You don't need the money so you do QCD first so you only pull 5K (or50K). RMD solved - no taxes - no AGI increase If you pull the RMD first then taxes and AGI increase then if still charitable you have to throw that on your taxes for the deduction

SHELDON D from MD posted over 2 years ago:

RMD is the amount one is legally required to withdraw in a year. For our purposes, there are two kinds of withdrawals, QCDs and normal distributions. There are three rules with regard to federal taxation: (1) the total of the QCDs and other distributions must be at least the RMD; (2) the QCDs (up to the allowed limit) are not taxable; (3) the normal distributions are taxable. As others have mentioned, timing is completely irrelevant.

KEITH M from CA posted almost 2 years ago:

Brian: Your article in AAII makes no sense to me.  If the first out rule applies, why do the QCD first.  Your example seems to address a separate issue of double withdraws.  I live in California.  Can you clarify this? Keith Marsh

STEPHEN P from GA posted almost 2 years ago:

This article and the subsequent confusion it caused seem to make it a good candidate for erasure and a re-write. My advisor pointed out that an IRA checkbook can be used all year long to write checks to qualified charities in parallel with writing checks to myself (to deposit in a checking, savings, or brokerage account). As long as the sum of all these totals to or exceeds the computed value of the RMD, the distribution is compliant with the law. The client will get a 1099-R with the total amount, and the first line on the tax form will report the total shown on the 1099-R, and the other line, for taxable portion, will report the total amount minus the values of the QCD's, with a single note above the line that says "QCD". This also keeps the QCD total excluded from AGI (not taxable). Even if you exceed the RMD, the reporting of the split remains the means of compliance reporting. Keep the year-end summary you receive from charitable institutions as backup for the exclusion (and be sure to confirm before giving that they are 501(c)(3) organizations.

CHARLES S from VA posted over 1 year ago:

From The Slott Report: https://irahelp.com/slottreport/qcd-timing/ QCD Timing Wednesday, December 04, 2024 By Andy Ives, CFP®, AIF® IRA Analyst Year after year, this topic continues to bubble up. Confusion exists over when a QCD can be done in relation to the RMD. Qualified charitable distributions (QCDs) can offset all or a portion of an RMD (required minimum distribution). However, for whatever reason, the sequencing of these items (QCDs and RMDs) confounds people. Let’s set the record straight, starting with some QCD fundamentals: QCDS are only available to IRA owners who are age 70½ and over. For 2024, the QCD cap is $105,000. (This cap increases to $108,000 in 2025.) QCDs cannot be done from employer plans – like a 401(k). Yes, QCDs can be done from an inherited IRA if the owner is 70 ½ or older. (It does not matter how old the now-deceased previous owner was.) Donations paid directly from an IRA to an eligible charity may be excluded from income. However, there can be no benefit back to the taxpayer. That’s the easy part. This next section is where the confusion starts: A popular recommendation is to execute a QCD early in the year to avoid any conflict with the “first-dollars-out rule.” The first dollars withdrawn from an IRA are deemed to count toward the RMD. Once an RMD is taken, it cannot be retroactively offset with a later QCD. Hence the advice to do your QCDs early to avoid this mistake. Example: John is 75 in 2024. The RMD on his IRA is $5,000. John committed to his church that he would gift this full amount. Prior to doing any QCDs, John takes a $2,000 distribution from his IRA in January 2024 to help pay the credit card bills from the previous holiday. Now it is December 2024. John informs his advisor that he would like to offset his entire RMD with a QCD. John cannot retroactively offset the $2,000 he took back in January. That $2,000 will be taxable. Since John has $3,000 remaining on his 2024 RMD, he has a handful of QCD options: John can do a $3,000 QCD to his church to offset the remaining portion of his RMD, but this would leave him short of his donation commitment. To meet his commitment, John can still do a $5,000 QCD to his church. This will result in $7,000 being withdrawn from his IRA for the year. This is perfectly acceptable, assuming John is willing to withdraw more than his RMD. In fact, John could do a QCD of $105,000 to his church. The total QCD amount is NOT limited to the RMD amount. The end result would be $107,000 distributed from his IRA, with only $2,000 being taxable to John. The point is that QCDs can be done at any time throughout the year. QCDs can also be done after all or a portion of the RMD has already been taken. The only reason it is suggested to do QCDs early is to avoid what John did – mistakenly take a taxable distribution that cannot be retroactively offset with a future QCD. End Note: Since 2024 is coming to a close, there is another reason to do QCDs early: Some IRA accounts allow check-writing privileges. Checks written to a charity from a “checkbook IRA” qualify as a valid QCD. However, the custodian may not recognize the distribution until the check is cashed! That could be in early 2025…and then we have problems.

JAMES O from OR posted over 1 year ago:

A friend is doing her QCD and RMD work today. She mentioned that since she does not fully trust the USPS she tells the broker to send the QCD checks to her so she can be sure the correct addresses for the intended charities can be checked. I spoke with my brokerage today and they agreed they could do this. I think this a good idea so I added this to the thread. I'll do my QCDs this week and then do the rest of our RMDs next week. Jim

BILL R from TX posted over 1 year ago:

As I understand it, a QCD must be a check from your IRA custodian to the charity. There are 2 ways to send the check: One is to have the check sent directly to the charity and the other is to have the check sent to me and then I relay the check on to the charity. The big problem I have experienced here in the Houston area is with postal employees apparently stealing mail. We think that they take a big bag of mail, sort through it looking for gift cards, then throw the rest of the bag away! This has happened to me twice this year! After a month or so waiting for my donation receipt, I called the charity and they told me that they did not receive the check, so I had to issue a Stop Payment order with my IRA custodian. In any case, the taxpayer is required to have the donation receipt for the QCD to legally be tax-free. So now the question is: To avoid the mail problems, can I make a normal withdrawal to my checking account, then immediately go to the charity web site, pay the exact same amount with my credit card, get the donation receipt (the same day or next), and count this as a valid QCD? My IRA custodian (Charles Schwab) counts QCDs as normal distributions (taxable) on the 1099 at the end of the year anyway, even if they were done by check directly from the IRA to the charity! This INFURIATES me! If my tax return gets audited by the IRS and I do not have the donation receipt, then I possibly lose my tax deduction.