RMD options?

[omni550]

This is the year I must begin RMDs from my tIRAs.

I've read a lot, but I'm still not sure about all my options.

I think these are the options in taking an RMD:

1) I can withdraw the entire RMD amount (this can be in a single withdrawal or spread out over the year) which is 100% subject to income taxes. Then I am free to do whatever I choose with those post-tax RMD funds (save, invest, spend, donate, etc.)

2) Through a QCD (Qualified Charitable Distribution), I can direct the custodian (Fidelity, Vanguard, etc.) to make a charitable contribution to one or more 501(c)(3) organizations in my name. This contribution can be up to the entire RMD amount and is capped at $100K/yr. The RMD amount routed through a QCF is not subject to income taxes, and will count towards my annual charitable giving as well as toward my RMD.

Is my understanding correct? Or are there other options of which I am unaware?

omni

 

[braumeister]

The RMD amount routed through a QCF is not subject to income taxes, and will count towards my annual charitable giving as well as toward my RMD.

One small correction. QCDs are not deductible on your taxes.

 

[RunningBum]

They aren't deductible but the money coming out of your IRA for the QCD does not add to your income, so it's even better than a deduction.

 

[OldShooter]

You've got it. Check with your IRA custodian on QCD procedures. Schwab just sends us check blanks, so donations are super easy. We write QCD checks for almost all deductible gifts, even for small amounts like public radio. IIRC Fido also offers checks.

In our case, our deductible expenses sans charitables are only about half the standard deduction, so using the QCDs lets us take the standard deduction and effectively get free money.

 

[Souschef]

My take, having done this for 13 years:
1. Sell securities, either all at once or through the year. I have a schedule I use to pay my estimated taxes and gift to our 4 sons on their birthdays.


2. Transfer shares or cash to a taxable account. I do this for DW, as her IRA is about 10% of mine


3. Use QCD's. I donate generously, because it also saves me taxes. I also take the standard deduction because there is no way I can come up with enough deductions.
Between state and federal taxes, it saves me 30%. For example, if I sold $10K of securities and just donated it, I would have to pay an additional $3K in taxes.

 

[omni550]

Thanks, everyone, for the feedback and information.

For QCDs, is it possible to "anonymize" them somehow or must they be done under your own name?

omni

 

[braumeister]

For QCDs, is it possible to "anonymize" them somehow or must they be done under your own name?

Not with mine. I wish I could. For the donations where I really want to be anonymous I use grants from my DAF instead. This is something you should ask your provider about.

 

[Souschef]

Thanks, everyone, for the feedback and information.

For QCDs, is it possible to "anonymize" them somehow or must they be done under your own name?

omni

I do not think so, but you can request your donation be anonymous. I have done that..

 

[MarieIG]

Sure hope the QCDs are still an option when I qualify. My "plan" (although sometimes plans go astray) is to leave money in my traditional IRA solely for that purpose.

 

[Gotadimple]

One other point. It depends on who your broker is. At Schwab if you choose to donate a part of your RMD as a QCD, then you must take the QCD first.

After that you can schedule your remaining RMD. You need both distributions to be at least the amount the broker calculated as your RMD to avoid a tax penalty.

- Rita

 

[jebmke]

I do not think so, but you can request your donation be anonymous. I have done that..

Request to whom?

 

[OldShooter]

One other point. It depends on who your broker is. At Schwab if you choose to donate a part of your RMD as a QCD, then you must take the QCD first.

After that you can schedule your remaining RMD. You need both distributions to be at least the amount the broker calculated as your RMD to avoid a tax penalty.

- Rita

Not sure I understand this. QCDs and RMDs really have nothing to do with each other except for the fact that the eligibility dates for the two used to be the same. This seems to have caused a lot of confusion about the two being linked.

QCD distributions, like any other tIRA distribution, count against whatever RMD dollar requirement that the taxpayer may have.

 

[OldShooter]

... For QCDs, is it possible to "anonymize" them somehow or must they be done under your own name?

If you don't give the charity your name how are they going to give you the receipt that you'll need to prove the donation?

 

[Dash man]

Request to whom?

The receiving charity will keep your name if you request it.

 

[omni550]

If you don't give the charity your name how are they going to give you the receipt that you'll need to prove the donation?

Dunno. I guess I was hoping it could be under some "shell" name. And maybe the receipt would come back thru the custodian somehow, linking the shell name to my account #, and thereby to me.

I HATE, HATE, HATE getting besieged for ever more donations. I do really despise it! Every time I get another donation request, I think about how much it cost them to create it and send it out....and it makes me want to give them less and less. If I can keep it anonymous, I figure less of my donation is wasted in this manner.

omni

 

[Gotadimple]

Not sure I understand this. QCDs and RMDs really have nothing to do with each other except for the fact that the eligibility dates for the two used to be the same. This seems to have caused a lot of confusion about the two being linked.

QCD distributions, like any other tIRA distribution, count against whatever RMD dollar requirement that the taxpayer may have.

Exactly, Old Shooter. The total of the QCD and TIRA distribution must equal at least the RMD amount calculated by the broker. My point was that my broker, Schwab, requires the Qualified Charitable Distributions be done before any other distribution.

Annual distributions from a TIRA can be more than the RMD. In my case I use both types of distributions and the total distributed is always more than the RMD. QCDs eliminate any tax liability for that distribution, but if one needs to make up the difference to equal a Required Minimum Distribution, the part that is NOT QCD is taxable.

- Rita

 

[Dash man]

Every time I get another donation request, I think about how much it cost them to create it and send it out....and it makes me want to give them less and less.

No need to be concerned about the cost of their mailings for larger charities. They get the printing and postage so cheap, their cost is minimal compared to what they bring in.
Telemarketing is a different story if they outsource it. They’re thieves!

 

[braumeister]

My point was that my broker, Schwab, requires the Qualified Charitable Distributions be done before any other distribution.

The reason for that is the IRS considers the first withdrawal(s) from a TIRA to be RMD(s) unless you designate them as QCD(s).

 

[OldShooter]

... My point was that my broker, Schwab, requires the Qualified Charitable Distributions be done before any other distribution. ...

We use Schwab. I have never heard of this and it makes no sense. To Schwab, a distribution is a distribution. All distributions are reported as one total on the 1099 and it is the taxpayer's responsibility to keep them sorted.

When we want to make a QCD we write a QCD check. When we want to take a distribution in cash, we do so. The two are completely independent.

 

[Souschef]

Request to whom?

Sorry, I was not clear. Request to donee organization. But, according to the IRS, you must get an acknowledgement from the charity, the same as you would for an ordinary donation.

 

[RunningBum]

Dunno. I guess I was hoping it could be under some "shell" name. And maybe the receipt would come back thru the custodian somehow, linking the shell name to my account #, and thereby to me.

I HATE, HATE, HATE getting besieged for ever more donations. I do really despise it! Every time I get another donation request, I think about how much it cost them to create it and send it out....and it makes me want to give them less and less. If I can keep it anonymous, I figure less of my donation is wasted in this manner.

omni

You can do this with a Donor Advised Fund (DAF), and I love this feature. There have been threads that explain how DAFs work so search for them. I did a lump sum DAF tax deductible donation one year, and now I'm granting funds to charities over time, usually anonymously. It's the DAF funding that's tax deductible. The grants are just paperwork with the DAF custodian and those are not taxable events.

The differences between DAFs and QCDs can make one of the other more favorable to you. QCDs keep your AGI down and don't require itemizing of deductions, but you can donate appreciated fund shares to a DAF and can gift anonymously.

 

[OldShooter]

The reason for that is the IRS considers the first withdrawal(s) from a TIRA to be RMD(s) unless you designate them as QCD(s).

I don't understand this either. The IRS has no timing information on what type of withdrawals were made or when. They just get a total number on the 1099. And when we report the QCDs, we don't itemize and we provide no timing information.

QCDs and RMDs are completely separate things except that the total QCD $$ in the year reduce reported income. The acronym "QCD" doesn't even appear in The IRS's "Retirement Plan and IRA Required Minimum Distributions FAQs" and the discussion in "Publication 590-B (2021), Distributions from Individual Retirement Arrangements (IRAs)" says nothing about the timing of distributions.

 

[gauss]

This is the year I must begin RMDs from my tIRAs.

I've read a lot, but I'm still not sure about all my options.

I think these are the options in taking an RMD:

1) I can withdraw the entire RMD amount (this can be in a single withdrawal or spread out over the year) which is 100% subject to income taxes. Then I am free to do whatever I choose with those post-tax RMD funds (save, invest, spend, donate, etc.)

2) Through a QCD (Qualified Charitable Distribution), I can direct the custodian (Fidelity, Vanguard, etc.) to make a charitable contribution to one or more 501(c)(3) organizations in my name. This contribution can be up to the entire RMD amount and is capped at $100K/yr. The RMD amount routed through a QCF is not subject to income taxes, and will count towards my annual charitable giving as well as toward my RMD.

Is my understanding correct? Or are there other options of which I am unaware?

omni

Splitting hairs here, but if you have nondeductible/after-tax contributions in the tIRA that you have been tracking on form 8606, then I think not all of the RMD will be taxable.

-gauss

 

[harllee]

I do QCDs every year from my Vanguard IRA and it works well. There is an online form to fill out, Vanguard mails the checks made payable to the charity to me and then I send the check to the charity with a cover letter. Regarding being solicited for more donations, I had one charity do this. After I made the QCD to them I started getting solicitations from them by mail and phone. I called the charity and told them point blank that if I ever received another solicitation from them whether by phone or mail they would never get another donation from me. The solicitations stopped immediately.

By the way you cannot do a QCD to a Donor Advised Fund.

 

[jebmke]

Sorry, I was not clear. Request to donee organization. But, according to the IRS, you must get an acknowledgement from the charity, the same as you would for an ordinary donation.

That doesn't quite get me where I want. I want total anonymity for some of our largest charities. I'll probably continue to fund our DAF for those even @ RMD time. Although I may be able to launder the donation through a Community Foundation.