RMD and Charity

[Snaggletooth]

Paul has RMD of $8000 this year from a conventional IRA. He was told he could direct some of his withdrawals to his favorite charity, ASCPA. So over the course of the year he directs $10,000 to be directly disbursed to ASCPA.

I'm told this tax saving feature is not available to individuals not old enough for RMD.

According to the above, Paul's distribution to charity exceeded his RMD.
Which of the following is true?

1. Paul has no income resulting from the transactions, and no money available for Schedule A charity deduction.
2. Paul exceeded his RMD by $2000, so he has $2000 in retirement income toward his AGI, and has $2000 available for Schedule A charity deduction.

Thank you in advance -

[RWG1950]

You seem to be saying Paul made $10K in Qualified Charitable Distributions (QCD) to ASCPA during the year by means of gifting directly from his IRA.
If Paul had a 2021 RMD, he must have been at least age 70 1/2 prior to 2020. 70 1/2 is the minimum attained age to be able to make a QCD.
Assuming Paul followed the QCD rules (see p.p. # 4-29 TTB), and the distributions were made directly from his IRA to an eligible charity, the $10K
should be tax free on his 1040 and none of this can be used as a charitable deduction. He'll show the $10K as gross IRA income, but $0 for taxable.
Your software's IRA data entry screen should allow you to designate all or a portion of the IRA distribution shown on the 1099-R as a QCD.
Any other non-QCD IRA distributions that he may have made that were paid directly to him, would be taxable IRA income to him for 2021.
Note that a QCD is reduced by the aggregate amounts of IRA contributions made after the taxpayer reaches age 70 1/2.
Any amounts given by means of tax free QCD cannot also then be used as charitable contributions anywhere on the tax return.
Hope this helps.

[terryats]

The rules for making a QCD do not limit the donation to your RMD. The only limit is $100,000 that would be taxable income if you took the distribution instead of having your trustee transfer directly to a chartable organization. Your clients trustee will issue him a 1099R for the $10,000, and as RWG said, your software should have a procedure to say it was all sent to a charitable organization

[Snaggletooth]

Thank you. Looks like the only limit for someone of RMD age is $100,000.

[New York Enrolled Agent]

Thank you. Looks like the only limit for someone of RMD age is $100,000.

For a small group of taxpayers there may be an additional limitation. If a taxpayer makes a deductible contribution to an IRA any time after attaining age 70 and one half, those contributions must be factored into the amount not included in gross income for purposes of a QCD. IRC 408(d)(8)(A).

[Lion]

See "Qualified charitable distributions" as a starting point for your research: https://www.irs.gov/publications/p59...blink100041439

[Anarchrist]

Thank you. Looks like the only limit for someone of RMD age is $100,000.

Odd fact is that the RMD age changed to 72 but the QCD age stayed at 70.5.