My first RMD will be in 2025. Lump sum withdrawal on 1/2/2025 or 12/31/2025?

[audreyh1]

The IRS limits for the following year usually come out in December?

Wrong, looks like they were published for 2025 already on Oct 23. IRS releases tax inflation adjustments for tax year 2025 | Internal Revenue Service

 

[TheWizard]

The Finance Buff says $108,000 for the 2025 QCD limit.

2024 2025 Tax Brackets, Standard Deduction, Capital Gains, QCD

The tax brackets, standard deduction, and the capital gains tax cutoff point for single and married filing jointly filing statuses will go up in 2025.

thefinancebuff.com

Three cheers for those of you who can hit that limit...

 

[target2019]

What if you write four (4) checks from your IRA at various times throughout the year for a total of 40K RMD?

Check #1 is deposited to your checking. Say that one is for 10K. Then you issue two checks to charitable - one for 5K and one for 5K. Check #4 for $20K is deposited to your checking. That works out to RMD of 30K for the year, with 10K QCD.

I can see that check-writing on the IRA account means you can't have taxes taken out by the institution. It's also up to you to collect paper work covering the QCD.

Glad I have 2025 to nail this all down.

Simplifying the question to see if any opinions change.

You write four (4) checks from your IRA at various times throughout the year for a total of 40K which equals your calculated RMD. Alternative works too, namely, make four (4) requests of your IRA custodian.

1. Check #1 for $10,000 is deposited to your checking.
2. Issue two $5,000 checks to two charitable institutions. The total QCD is $10,000.
3. Check #4 for $20,000 is deposited to your checking.

Is it correct that the result satisfies the year's RMD of 40K, with taxable portion of 30K, and QCD of 10K?

 

[audreyh1]

Yes.

What would make you think otherwise? I think it’s very clear.

 

[SecondCor521]

Simplifying the question to see if any opinions change.

You write four (4) checks from your IRA at various times throughout the year for a total of 40K which equals your calculated RMD. Alternative works too, namely, make four (4) requests of your IRA custodian.

1. Check #1 for $10,000 is deposited to your checking.
2. Issue two $5,000 checks to two charitable institutions. The total QCD is $10,000.
3. Check #4 for $20,000 is deposited to your checking.

Is it correct that the result satisfies the year's RMD of 40K, with taxable portion of 30K, and QCD of 10K?

Yes, it does. I agree with audreyh1.

As I've said multiple times on this thread, there are no ordering requirements between QCDs and ordinary distributions.

QCDs always count towards the RMD.

QCDs, if you meet the (fairly minimal) requirements, don't add to taxable income. The minimal requirements basically are: $$ goes directly to charity, you get an acknowledgment from the charity, you're over 70.5, the QCD for the year doesn't exceed the (pretty generous) maximum of ~$105K, you note "QCD" on line 4b of your return, and you subtract the QCD amount from line 4b.

 

[target2019]

Yes.

What would make you think otherwise? I think it’s very clear.

Just confirming my understanding of all responses after my initial question(s). I also re-stated my questions in view of the new learnings I acquired due to those responses.

 

[target2019]

Yes, it does. I agree with audreyh1.

As I've said multiple times on this thread, there are no ordering requirements between QCDs and ordinary distributions.

QCDs always count towards the RMD.

QCDs, if you meet the (fairly minimal) requirements, don't add to taxable income. The minimal requirements basically are: $$ goes directly to charity, you get an acknowledgment from the charity, you're over 70.5, the QCD for the year doesn't exceed the (pretty generous) maximum of ~$105K, you note "QCD" on line 4b of your return, and you subtract the QCD amount from line 4b.

Can't say I recall anything in this thread about ordering of withdrawals, but I do recognize my comprehension is deteriorating, and I probably missed or can't recall all of your posts. So, sorry if the restating seemed un-necessary in the thread.

I have 5 pages of notes to my heirs, and like to include something brief about a relevant subject like IRA/RMD/QCD for understanding.

 

[SecondCor521]

Can't say I recall anything in this thread about ordering of withdrawals, but I do recognize my comprehension is deteriorating, and I probably missed or can't recall all of your posts. So, sorry if the restating seemed un-necessary in the thread.

I have 5 pages of notes to my heirs, and like to include something brief about a relevant subject like IRA/RMD/QCD for understanding.

No worries. I'm cranky for other reasons and it spilled over into my comments here. Sorry about that.

 

[orbops]

I take my Inherited Rollover IRA RMD in the first week of January and withhold a portion of it to pay down taxes for the new year.

 

[rayvt]

Thought of one reason. If you plan to do QCDs, you should probably wait on RMDs until you decide for sure that you are and how much.

OK, 2 reasons is that you can do withholding on your RMD (correct?) and you might wait until December to see how much to withhold based on your other taxable activity. Withholding is assumed to be done evenly throughout the year even if you do it in December.

So I spoke too early, but gave reasons to do it early or late.

Careful! QCDs must be taken out of the RMD. If you take all the RMD, you cannot retroactively take a QCD and have it applied to the RMD.

 

[audreyh1]

QCDs don’t have to be taken out of the RMD, whatever that means as RMD stands for required minimum distribution and is an annually determined number. QCDs can be applied towards your RMD if you wish to withdraw a smaller taxable normal distribution yet also meet your RMD. But QCDs can be taken at any time once you are 70.5 independently of any RMD up to the ~$105K annual limit.

You can never do a QCD and have it reduce the taxable income from any normal distribution that you also took regardless of your RMD. I suppose folks have wrong-headedly tried this, which is why it is warned against, but it would never have worked that way regardless. It’s a pretty strange thing to try to do.

 

[rayvt]

" if an RMD was already taken earlier in the year, a QCD taken subsequently can’t offset the RMD income. The QCD will still be excluded from income, but the RMD already taken will be included in income. To avoid that result, make sure to do the QCD first, before taking the RMD."

 

[audreyh1]

rayvt - you keep bringing this up, but it doesn’t matter. A QCD never offsets a normal distribution regardless of the RMD. And you don’t take an RMD, you meet an RMD.

Sorry, but the language you keep quoting is very poor.

 

[rayvt]

Sure. But people keep getting it wrong. They think they can take (take, meet, satisfy, whatever) their RMD early in the year and then take a QCD later in the year and think that this QCD will count toward the RMD.

It doesn't. Instead of the donation being tax-free it is taxed in addition to the tax of the earlier distribution that satisfied the RMD.

 

[audreyh1]

No, no QCD is taxable no matter when you did it. We’ve already been through this. The order or the amount of a QCD up to the annual QCD limit doesn’t make a QCD taxable. Anyone who says so is flat wrong. And it has nothing to do with your RMD.

 

[target2019]

No worries. I'm cranky for other reasons and it spilled over into my comments here. Sorry about that.

I embrace my crankiness some days.

Somewhere in this discussion it occurred to me that I should send a QCD now, and another in early 2025. In both years I have no RMD to satisfy. It will be a significant, but not huge, QCD. So thanks for hanging through the messages and making things crystal clear.

 

[audreyh1]

Yes, once you reach age 70.5 you can do QCDs from your IRAs up to $105K a year (inflation adjusted each year).

 

[target2019]

Yes, once you reach age 70.5 you can do QCDs from your IRAs up to $105K a year (inflation adjusted each year).

I'm going to take my RMD in 2026, hopefully.

Yes, you can chastize me for using that word.

jk. Mea culpa.

 

[Midpack]

Sure. But people keep getting it wrong. They think they can take (take, meet, satisfy, whatever) their RMD early in the year and then take a QCD later in the year and think that this QCD will count toward the RMD.

It doesn't. Instead of the donation being tax-free it is taxed in addition to the tax of the earlier distribution that satisfied the RMD.

Needs clarification. Maybe examples could help. Let's say your RMD is $10K.

• If you withdraw $5K from a TIRA in January, and then do a $5K QCD in December - you have satisfied your RMD. $5K qualifies as a QCD, and your taxable IRA distribution is $5K.
• OTOH if you withdraw $10K in January, and then take a $5K QCD in June - hoping that will result in a $5K QCD and a taxable IRA distribution of $10K, it won't. Your QCD won't count as you've already satisfied your RMD, no more room. Your taxable IRA distribution will be $15K even if you sent $5K to a qualified charity.

Lots of people say you have to take QCDs first, that's not actually true, but it does ensure your QCD will qualify towards RMD if you're of RMD age. You just have to make sure you take your QCD before you've fully satisfied your RMD. The order doesn't necessarily matter.

• You could withdraw $4K in Jan, take a $3K QCD in Jun, and another $3K withdrawal in Dec - and your taxable IRA distribution would be $7K.

Third, QCDs can count toward your annual required minimum distributions, but be sure to do the QCD before taking your full RMD for the year for yourself. Note you can’t deduct the QCD as a charitable contribution on Schedule A.

QCDs Are a Tax-Smart Way for Retirees To Donate to Charity

With QCDs, retirees can save on taxes by making donations from their IRAs directly to charity. What you need to know about qualified charitable distributions.

www.kiplinger.com

Example 3: RMD is not QCD, and QCD is not RMD.
76-year-old Karen’s RMD for her traditional IRAs for 2024 is $75,000.
Karen took a distribution of $75,000 from her IRA in January and had it sent to her checking account. Because it is her first distribution for the year, it counts as her RMD.
Karen later tells her financial advisor that she wants to make a QCD of $75,000 and wants to know if she can roll over the $75,000 taken in January and have it reissued as a QCD.
The RMD cannot be rolled over. As a result, the $75,000 will be included in Karen’s income.
Karen can still do a QCD if she wants to, but it will not count toward her RMD because her RMD has already been satisfied.

https://www.morningstar.com/personal-finance/how-make-tax-free-donation-your-ira

 

[audreyh1]

I'm going to take my RMD in 2026, hopefully.

Yes, you can chastize me for using that word.

jk. Mea culpa.

It is common, but when you use QCDs to meet part of your
RMD it can get confusing. If you don’t want to exceed your RMD then you need to only take your RMD minus QCDs as a normal distribution. This is where the quoted language in post number #112 falls apart.

" if an RMD was already taken earlier in the year, a QCD taken subsequently can’t offset the RMD income. The QCD will still be excluded from income, but the RMD already taken will be included in income. To avoid that result, make sure to do the QCD first, before taking the RMD."

If you wish to use QCDs to meet part of your RMD, then only take out your RMD minus the QCDs as a normal distribution.

Order makes no difference.

 

[audreyh1]

Misstated. Let's say your RMD is $10K.

• If you withdraw $5K from a TIRA in January, and then do a $5K QCD in December - you have satisfied your RMD. $5K qualifies as a QCD, and your taxable distribution is $5K.
• OTOH if you withdraw $10K in January, and then take a $5K QCD in June - hoping that will result in a $5K QCD and a taxable distribution of $10K, it won't. Your QCD won't count as you've already satisfied your RMD, no more room. Your taxable distribution will be $15K even if you sent $5K to a qualified charity.

Lots of people say you have to take QCDs first, that's not actually true, but it does ensure your QCD will qualify towards RMD if you're of RMD age. You just have to make sure you take your QCD before you've fully satisfied your RMD. The order doesn't necessarily matter.

• You could withdraw $4K in Jan, take a $3K QCD in Jun, and another $3K withdrawal in Dec - and your taxable distribution would be $7K.

Your taxable distribution in example bullet 2 is still only $10K. Exceeding your RMD via QCDs doesn’t magically make them taxable.

Your total distribution was $15K. Your QCD was $5K and it is not taxable. When you file your taxes you subtract the QCDs from your total distribution and only the remaining $10K is taxable. Line 4 1040 - is where you subtract QCDs.

 

[Midpack]

Your taxable distribution in example bullet 2 is still only $10K. Exceeding your RMD via QCDs doesn’t magically make them taxable.

Your total distribution was $15K. Your QCD was $5K and it is not taxable. When you file your taxes you subtract the QCDs from your total distribution and only the remaining $10K is taxable. Line 4 1040 - line 4b is where you put your QCD total, and it is subtracted from your total distributions on line 4a.

Then Morningstar has it wrong. See example 3 above.

I've read IRS rules many times, it's criminal they don't lay it out clearly. It's in bits and pieces, if even complete.

The bottom line is if you want to reduce your taxable IRA distribution using QCDs, the optimal is to make sure your total distributions including QCDs meet but don't exceed your RMD amount.

 

[audreyh1]

Then Morningstar has it wrong. See example 3 above.

I've read IRS rules many times, it's criminal they don't lay it out clearly. It's in bits and pieces, if even complete.

Morningstar Example 3 is correct. It simply says she cannot rollover a normal distribution that she had already taken to meet her RMD. If she had taken a larger normal distribution then she might have been able to rollover the excess (don’t know exactly). It says nothing about QCDs exceeding the RMD.

This is the rule that once you reach your RMD age, only amounts exceeding your RMD can be converted, etc.

Unfortunately, I think we are victims of a quagmire of third party examples that are confusing, often poorly worded, and sometimes flat out wrong.

1. You have an annual RMD you must meet once you reach RMD age.
2. RMDs can be met via normal distributions or QCDs or a combination.
3. The taxable income portion of your distributions is Total Distributions minus Total QCDs.
4. QCDs may be made up to $105K per year.
5. You can only rollover/convert amounts exceeding your RMD each year.

That’s it, no ordering, no taxable QCDs.

 

[Midpack]

Unfortunately, I think we are victims of a quagmire of third party examples that are confusing, often poorly worded, and sometimes flat out wrong.

If you're right, and you may well be as I reread - this ^ is an understatement. I have read way more articles and examples, not only many here, but in posts by popular supposedly reputable financial sites that insist otherwise. Most seem to refer to an IRS "first dollars out rule" with no reference, and I can't find same. They insist QCDs after and in excess of other IRA distributions don't count toward RMDs and are taxable.

Exhibit A Publication 590-B (2023), Distributions from Individual Retirement Arrangements (IRAs) | Internal Revenue Service

 

[audreyh1]

I gave some background in post number #96 - very skimpy from what I’ve read the on this first-dollars-out rule. My first RMD will be in 2025. Lump sum withdrawal on 1/2/2025 or 12/31/2025?

I searched for the word “first” in your linked Exhibit A, 57 occurrences and not a single “first-dollar-out” or “first dollars” mention.

I’ve only seen one link that declares QCDs above your RMD to be taxable and that is flat out wrong.