accounting for RMD direct charity donations (edit)

SRHann

I have 2 MDFs that went directly to a charity. I want them to show up as a contribution in my Quicken checking account, but their impact on the account was zero. Is there a way that I can enter them as income which is offset by the contribution?

volvogirl

You mean RMD required minimum distribution. I did a QCD in 2023. I entered a sold transaction in my IRA which created a cash balance. Then I did a withdrawal to my charity category. They don't need to show up in your checking account. And they should not be income. You will get a 1099R tax form for it. You don't count it as income and you don't get a charity deduction for it. It is a wash.

NotACPA

What's an MDF?

SRHann

I meant MDR, minimum distribution requirement. It's the amount you have to start taking from investments after you turn 70 1/2. It's counted as income; but if you have it sent directly from the financial institution to the charity, it is not taxable and is still countable as a contribution.

volvogirl

You mean RMD required minimum distribution. I did a QCD in 2023. I entered a sold transaction in my IRA which created a cash balance. Then I did a withdrawal to my charity category. They don't need to show up in your checking account. And they should not be income. You will get a 1099R tax form for it. You don't count it as income and you don't get a charity deduction for it. It is a wash.

SRHann

Thanks.

[edit] updated topic title to reflect RMD

Ps56k2

So… the QCD merely prevents the RMD withdrawal amount as appearing as Ordinary Income -
and therefore, it also never appears as a Charity donation taken from your cash assets …

SRHann

I found this on the IRS website. I can't post the link here because I haven't been a member of the Quicken community long enough; but if you search on qualified charitable distributions, it will take you to it. I didn't know this, but it makes sense that if you don't have to list it as income you can't take it as a deduction.

volvogirl

By the way, on your tax return it will show up as gross income on 1040 line 4a but zero taxable on line 4b with QCD by it. The benefit you get is you don't count it as taxable income but then you can't take a charity deduction for it either. Which is OK since most people take the Standard Deduction and don't have enough deductions to itemize now.

SRHann

Yes. It will reduce the taxable income and probably reduce the amount of Social Security that is taxable. I will probably end up using the standard deduction anyway,

Rocket J Squirrel

@SRHann

I meant MDR, minimum distribution requirement. It's the amount you have to start taking from investments after you turn 70 1/2.

You may start taking QCDs at age 70½, but RMDs start later (unless the IRA is inherited and the deceased was already taking RMDs).

Required minimum distributions (RMDs) are the minimum amounts you must withdraw from your retirement accounts each year. You generally must start taking withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts when you reach age 72 (73 if you reach age 72 after Dec. 31, 2022).

Crenshaw

I think Volvogirl has nailed the legal terms and consequences of a QCD (Qualified Charitable Distribution) from a traditional IRA: It decreases your AGI (Adjusted Gross Income) and, for those on regular Medicare, helps to avoid the IRMAA (Income Related Monthly Adjustment Amount) extra charges for Medicare parts B and D if your AGI is above a certain amount (2023: $97,000 for individual filers; $197,000 for married joint filers. ) If you took a charitable deduction on Schedule A you would have to have enough deductions to exceed the Standard Deduction before you'd get the benefit of your charitable deduction (other than the warm feelings for doing good for humanity😉) and it wouldn't help decrease any additional Medicare charges.

The donation from the IRA must go directly to the charity. But, most experts agree the IRA trustee can make out a check to the charity, but send you the check to send to the charity (e.g., for those times when the charity is having a "matching" campaign.) But if the IRA trustee sends you a check payable to you, your donation will not count as a QCD and your AGI will not be lowered.

If you are audited, you will need to have correspondence from the charity confirming that you received nothing of value in return for your donation (not sure how Tee shirts and tote bags factor into that determination).

Just a thumbnail overview. Check with your tax advisor to be sure.

For purposes of this thread, I do wish Quicken would figure out a way to deal with these RMDs and QCDs. Although it is a charitable deduction, if you count it as such in the normal way, it may look like it can go on Schedule A; it can't. And it may improperly be added to your income for the year. I'm going to see if Volvogirl's recommendation works for us.

Quicken user since DOS; now Win 10 Home version, Quicken Premier Classic, yearly subscription

volvogirl

Yes that's what Vanguard did for my QCD. I filled out the QCD request online (very easy) and they sent me the check made out to the charity which I mailed in with the charity donation form.