The RMD: Timing Is Everything

Does the timing of the first RMD for a 73-year-old matter? A question from a client came up about a donor who was turning 73 in the calendar year using their Individual Retirement Account (IRA) to fund a charitable gift. Would a qualified charitable distribution (QCD) taken in the year the donor turns 73 but before the donor’s actual 73rd birthday count toward the Required Minimum Distribution (RMD) for that year? For instance, can a donor turning 73 on December 31st establish a QCD charitable gift annuity (CGA) on December 1st and still have it count toward their RMD?

Can The Donor “Gift” Her Entire IRA to a Charity – Now, During Life?

This question comes up from time to time. Some might point out that “gift” is not a verb, but we’ve all heard it used that way, and everyone knows what it means. In our niche area of fundraising, professional gift planners routinely speak with donors about the possibility of making charitable gifts with funds from qualified retirement plans. The Individual Retirement Account (IRA) is a vehicle in which many Americans hold considerable wealth, and it’s only natural to ask whether some of those funds could be used for charitable gifts. It IS possible to use funds from IRAs and other retirement plans to make gifts to charities, however, there are limitations and conditions. Gift planning professionals should be familiar with these unique requirements.

Dancing with the Taxman: Tax Reporting of Qualified Charitable Distributions

The Qualified Charitable Distribution (QCD) from an IRA has become a popular way for donors who are 70 ½ or older to make charitable gifts. Financial advisors routinely tell their clients that charitable gifts via a QCD are a tax-smart way to make those gifts. Problems Reporting QCDs Unfortunately, QCD donors have found the guidance on how to report QCDs on their tax returns muddled. The problems have been two-fold.

Pledge to Make a QCD

When the qualified charitable distribution (QCD) from Individual Retirement Accounts (IRA) was first introduced in 2006, the timing for colleges and universities that push for 50th reunion gifts could not have been better. The new outright gift was available to donors who were age 70 ½ or older, which cleanly aligned with the age of many 50th reunion alumni. In 2006, a donor who was age 70 ½ or older was also faced with making a taxable required minimum distribution (RMD) from their IRA. The QCD outright gift provided relief by allowing a tax-free withdrawal. While there was no charitable deduction, donors benefitted by avoiding ordinary income tax on the portion of their RMD fulfilled by their QCD and receiving reunion credit for their gift. Over time, the age at which a donor could make a QCD gift diverged from the age at which they must begin taking withdrawals from their IRA. In 2025, a donor can make a QCD at age 70 ½ or older, but they are not required to take an RMD until age...