Without a requirement for RMD's in 2020, are you still going to make your QCD's?

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1210sda
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Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by 1210sda »

For those who are eligible to make QCD's:

Are you going to continue to make the QCD's now that they won't be required in 2020.

Or, will you make a Roth conversion?

Example:
1. Before you knew that the RMD requirement was going to be dropped in 2020 you had a gross RMD of $50,000. You planned to give $20,000 as a QCD. The net RMD of $30,000 would remain as a taxable distribution.

2.Now that you know about RMD's not being required in 2020, would you take the net RMD of $30,000 and convert it to a Roth IRA? Your tax liability would be the same as in example #1. Or, would you just not withdraw the $30,000 from your T-IRA and have a lower tax bill?

3. Would you change your plans and make the charities wait until next year for their QCD's?
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David Jay
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by David Jay »

Some recent discussion here: viewtopic.php?f=1&t=310166
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GerryL
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by GerryL »

Already did my planned QCDs for the year.
While we wait for rules about undoing distributions during this RMD holiday, I am going to run some scenarios, including one that would have me redepositing money (from my cash stash) into my IRA and claiming the former QCDs as charitable deductions. I intend to itemize this year anyway.
AlwaysaQ
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by AlwaysaQ »

I still plan to make QCDs from my TIRA. Maybe even do a small Roth conversion. I plan to make estimated federal tax payments instead of taking a distribution to pay the taxes.
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Sheepdog
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by Sheepdog »

I made some QCDs before the change was announced. I decided to continue donations by checks for the rest of this year, but no more QCDs. I will do another partial rollover to a Roth as I have done several times.
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sport
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by sport »

I made some in January. I had planned to make others. For those, I will double up next year.
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1210sda
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by 1210sda »

Thank you to Sport for the suggestion of skipping this year's QCD and doubling up next year. I ran some numbers on Turbo Tax what-if and there could be a very nice tax savings over the two years.

I'm trying to get a handle around which would be better for me....the double QCD approach or the Roth conversion this year approach. Doing a Roth conversion has a lot of variables. I'm not quite sure how to compare the two. I'm hoping some BH has gone through this process and can provide some guidance.
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celia
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by celia »

1210sda wrote: Wed Apr 01, 2020 5:45 pm I'm trying to get a handle around which would be better for me....the double QCD approach or the Roth conversion this year approach.
Why not consider doing both? Convert this year to take advantage of the low prices, then next year you can do a double QCD if you don't need all of the RMD for living expenses.
Doing a Roth conversion has a lot of variables. I'm not quite sure how to compare the two.
Why are you trying to compare a double QCD and an RMD? That is like comparing apples to oranges. The only thing they have in common is that money is removed from the tIRA. These are all withdrawals from a tIRA:
withdraw to taxable to pay bills
withdraw to taxable to re-invest
withdraw/withhold to send to the IRS
withdraw to go directly to a Roth
withdraw to go directly to a charity (QCD)

All of these have the same tax hit except for the QCD. Next year if you don't need any of your RMD, the entire withdrawal can be a QCD.

Run the possible scenarios you are considering through your tax software to see the tax differences. It is quite easy.
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1210sda
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by 1210sda »

celia wrote: Wed Apr 01, 2020 6:24 pm Why not consider doing both? Convert this year to take advantage of the low prices, then next year you can do a double QCD if you don't need all of the RMD for living expenses.
If I don't take any RMD's (since they are not required) or do any QCD's this year, my tax bill will be greatly reduced for 2020. If I do double QCD's next year, my taxes will also be less for 2021 than if I only did one year's QCD.

If I do a Roth conversion for 2020, then I won't have the income tax reduction I previously mentioned. My decision is whether I prefer to save taxes or increase the size of my Roth IRA.

If I did both, my tax benefit would not be as great.

Thank you very much for responding.
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by fourwheelcycle »

We are definitely doing all of our planned QCDs this year. My main charity is a regional senior center that suddenly has greatly increased expenses to support seniors in their homes since they can no longer come out for congregate meals in their local communities; to help them ASAP I moved up my QCD from September to March.
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by Alan S. »

GerryL wrote: Wed Apr 01, 2020 4:51 pm Already did my planned QCDs for the year.
While we wait for rules about undoing distributions during this RMD holiday, I am going to run some scenarios, including one that would have me redepositing money (from my cash stash) into my IRA and claiming the former QCDs as charitable deductions. I intend to itemize this year anyway.
Have been waiting for this possibility to come up. First time anyone has mentioned it as far as I know.

A QCD can be replaced by a rollover contribution. If you do this, you would not report a QCD on line 4b, but would qualify for the charitable deduction. In effect, the 10,000 is treated as being distributed to you and then you make a cash contribution of that money. Following is a comparison assuming a starting IRA balance of 10,000 and a 10,000 QCD was done earlier this year. The example assumes that you are itemizing and already have enough deductions to equal your standard deduction before the donation to the charity.

Retain 10k QCD / Replace QCD with 10k rollover

IRA balance after transaction 0 / 10k
Taxable Income from transaction 0 / -10k
Finishing taxable AC balance 10k/ 0
Charity received 10k / 10k

Net effect - you reduce taxable income 10k, but now have 10k in your IRA instead of in taxable. This is a real loser unless you can fully itemize the donation. But if you can, it pushes taxable income from 2020 to later years. That may be beneficial or not beneficial.
Last edited by Alan S. on Thu Apr 02, 2020 7:34 pm, edited 1 time in total.
DV Nayak
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by DV Nayak »

David Jay wrote: Wed Apr 01, 2020 2:55 pm Some recent discussion here: viewtopic.php?f=1&t=310166
Is the *suspended* RMD for 2020 added to 2121 RMD?
sport
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by sport »

DV Nayak wrote: Thu Apr 02, 2020 7:03 pm
David Jay wrote: Wed Apr 01, 2020 2:55 pm Some recent discussion here: viewtopic.php?f=1&t=310166
Is the *suspended* RMD for 2020 added to 2121 RMD?
No. However, if you do not make the distribution, your balance on 12/31/20 will be higher so your 2021 RMD will be larger than it would be otherwise.
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by RadAudit »

fourwheelcycle wrote: Thu Apr 02, 2020 6:02 am We are definitely doing all of our planned QCDs this year. My main charity is a regional senior center that suddenly has greatly increased expenses to support seniors in their homes since they can no longer come out for congregate meals in their local communities; to help them ASAP I moved up my QCD from September to March.
+1. Good decision!

It's just a personal opinion; but, at times like these, I believe some charities are going to be hurting for contributions and their clients may be in even worse circumstances. If you can afford to make a QCD at this time, hopefully, they'll put it to good use.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by tomd37 »

I have not been itemizing for the past 18 years since retirement and it does not appear I will be in a position when itemizing might come back into the picture. That said, I have not yet taken my QCD for this year and now that I don't have to take my RMD this year I did some "back of the napkin" tax calculations for tax years 2020 and 2021 as they relate to not doing a QCD in 2020 and doubling up next tax year. Talking about $19K QCD per year. That lowers my taxable income considerably in both tax years. Also considered what I think might be the impact on these charities and I believe they could handle it this year as most are large organizations with a large base source of income.

The other issue to be considered is the Roth conversions that I started again last year. My cash position is such that I can fund the additional tax on any conversion. However I do not want to convert to a point above where IRMAA comes into play in the future. I will be following this initial post and all the comments that will continue to come in as it gains momentum.
Last edited by tomd37 on Sat Apr 04, 2020 9:19 am, edited 1 time in total.
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by Alan S. »

I think the charities will definitely need more help this year than any of the last several years.

That said, up until March things were about as good as they could be, so entering the meltdown there was some fat on the bone. As each month passes things will be worsening at an unprecedented rate and situations for many Americans will be more dire.

Therefore, it is reasonable to assume that these charities will be in greater need in 2021 than even in 2020 as the dominos continue to fall. Their donations will be down and the needs of those they help will be greater than they are now.

Counterbalancing those points however, is that the QCD donor may also end up in far less secure circumstances in 2021 than they are right now and may not be able to make that double QCD.
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by ralph124cf »

I try to practice income smoothing. I am doing my QCD and then converting the remainder of my RMD to ROTH. This allows me to keep my AGI constant from year to year and below tax bracket and IRMAA bracket limits.

I am already taking monthly distributions from some retirement accounts, but I will now change to 90% income tax withholding to cover the portion of RMD that goes to the ROTH.

rALPH
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by sport »

ralph124cf wrote: Fri Apr 03, 2020 10:32 pm I try to practice income smoothing. I am doing my QCD and then converting the remainder of my RMD to ROTH. This allows me to keep my AGI constant from year to year and below tax bracket and IRMAA bracket limits.

I am already taking monthly distributions from some retirement accounts, but I will now change to 90% income tax withholding to cover the portion of RMD that goes to the ROTH.

rALPH
I believe that you are not permitted to convert any part of your RMD to a Roth IRA. This year, there is no problem because there is no RMD. However, in past years and future years, I don't think you can do that legally.
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by Sheepdog »

sport wrote: Sat Apr 04, 2020 12:03 am
I believe that you are not permitted to convert any part of your RMD to a Roth IRA. This year, there is no problem because there is no RMD. However, in past years and future years, I don't think you can do that legally.
If you have taken all of your required RMDs via taking distributions and/or QCDs in that year,, you can then convert some to Roths. (I have done some rollovers in several years.)
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by sport »

Sheepdog wrote: Sat Apr 04, 2020 4:07 am
sport wrote: Sat Apr 04, 2020 12:03 am
I believe that you are not permitted to convert any part of your RMD to a Roth IRA. This year, there is no problem because there is no RMD. However, in past years and future years, I don't think you can do that legally.
If you have taken all of your required RMDs via taking distributions and/or QCDs in that year,, you can then convert some to Roths. (I have done some rollovers in several years.)
That is correct. You can make conversions from a TIRA to a Roth IRA only after the RMD has been completed.
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1210sda
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by 1210sda »

If you aren't going to withdraw from your Roth IRA, is there any real benefit over a Traditional IRA?

P.S. You also intend to leave your IRA's (Trad or Roth) to charity....
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by kaneohe »

1210sda wrote: Sat Apr 04, 2020 10:50 am If you aren't going to withdraw from your Roth IRA, is there any real benefit over a Traditional IRA?

P.S. You also intend to leave your IRA's (Trad or Roth) to charity....
If you are leaving your IRA to charity, better not to convert so the charity will get the pre-tax value and won't pay taxes on it.
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1210sda
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by 1210sda »

kaneohe wrote: Sat Apr 04, 2020 11:04 am
1210sda wrote: Sat Apr 04, 2020 10:50 am If you aren't going to withdraw from your Roth IRA, is there any real benefit over a Traditional IRA?

P.S. You also intend to leave your IRA's (Trad or Roth) to charity....
If you are leaving your IRA to charity, better not to convert so the charity will get the pre-tax value and won't pay taxes on it.
Thank you!!

I did think of one possible, small benefit.....The amount of T-IRA you convert to a Roth this year will help reduce next year's RMD from your T-IRA.
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by Sheepdog »

1210sda wrote: Sat Apr 04, 2020 10:50 am If you aren't going to withdraw from your Roth IRA, is there any real benefit over a Traditional IRA?

P.S. You also intend to leave your IRA's (Trad or Roth) to charity....
Or to family members. My tax rate in retirement is low. My children's are much higher. I can convert and have to pay relatively low tax on the conversion, like 10%. When they inherit it, they will not have to pay taxes on the Roth when they withdraw, but would have to on the traditional IRA.
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by GerryL »

Alan S. wrote: Thu Apr 02, 2020 12:08 pm
GerryL wrote: Wed Apr 01, 2020 4:51 pm Already did my planned QCDs for the year.
While we wait for rules about undoing distributions during this RMD holiday, I am going to run some scenarios, including one that would have me redepositing money (from my cash stash) into my IRA and claiming the former QCDs as charitable deductions. I intend to itemize this year anyway.
Have been waiting for this possibility to come up. First time anyone has mentioned it as far as I know.

A QCD can be replaced by a rollover contribution. If you do this, you would not report a QCD on line 4b, but would qualify for the charitable deduction. In effect, the 10,000 is treated as being distributed to you and then you make a cash contribution of that money. Following is a comparison assuming a starting IRA balance of 10,000 and a 10,000 QCD was done earlier this year. The example assumes that you are itemizing and already have enough deductions to equal your standard deduction before the donation to the charity.

Retain 10k QCD / Replace QCD with 10k rollover

IRA balance after transaction 0 / 10k
Taxable Income from transaction 0 / -10k
Finishing taxable AC balance 10k/ 0
Charity received 10k / 10k

Net effect - you reduce taxable income 10k, but now have 10k in your IRA instead of in taxable. This is a real loser unless you can fully itemize the donation. But if you can, it pushes taxable income from 2020 to later years. That may be beneficial or not beneficial.
Had a nice surprise today regarding whether to take any more of the un-RMD from my IRA this year.
I had already decided before the deadline to leave the QCD as-is and not replace the distribution with a rollover. But today I sat down to run the first scenario to see whether it made sense to take any more out of my IRA, probably only enough to cover taxes on my other income.

Turns out that without the RMD, less than 1/3 of my SS is considered taxable, and, with the deductions I bundled into this year, my fed tax bill is well below the $1000 that would have required est taxes or withholding. And state is $0. I don't even need to run any other scenarios, although I will rerun this one once my property tax bill comes in. That was a lot less effort than I was expecting. (Of course, I'm using last year's s/w, so the results are very rough.)
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by JackoC »

RadAudit wrote: Fri Apr 03, 2020 4:09 pm
fourwheelcycle wrote: Thu Apr 02, 2020 6:02 am We are definitely doing all of our planned QCDs this year. My main charity is a regional senior center that suddenly has greatly increased expenses to support seniors in their homes since they can no longer come out for congregate meals in their local communities; to help them ASAP I moved up my QCD from September to March.
+1. Good decision!
It's just a personal opinion; but, at times like these, I believe some charities are going to be hurting for contributions and their clients may be in even worse circumstances. If you can afford to make a QCD at this time, hopefully, they'll put it to good use.
Right, the OP states it basically as make QCD or make charities wait. But actually many people could either do a QCD or give cash or appreciated assets for the same amount. I'm not at RMD/QCD age yet and currently do all charitable contributions to Donor Advised Fund in form of appreciated ETF shares. When I reach RMD/QCD age I figure QCD's will be the more tax efficient way to give (directly, not allowed through a DAF). But that's because the RMD is otherwise federal taxable income (unfortunately it will be NJ taxable income QCD or not). If the withdrawal requirement is suspended for a year, I'd probably revert to giving appreciated assets that year, rather than either making a QCD without RMD or making the charities wait.
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Re: Without a requirement for RMD's in 2020, are you still going to make your QCD's?

Post by cheese_breath »

Of course I will. The primary intent is to give to the charity. QCDs are just frosting on the cake.
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