Don’t Forget Tax Day and the Return of Required Minimum Distributions (RMD)

After a one-month deadline extension, Tax Day is upon us again on Monday, May 17.  Finish reading Fetch, then organize your papers and get out your calculator. . .

This also means the return of the required minimum distributions (RMD) from individual retirement accounts (IRAs) for those who turned or will turn age 72 this year. This requirement was waived in 2020 as a result of the CARES Act, but if you turned 72 in 2020, you will be required to take a distribution by April 1, 2022.  But, be careful!  If you wait until next year to take your initial distribution, you will be required to take two RMDs in the same tax year, which is the “double-whammy effect” that financial advisors are warning about.    

A qualified charitable distribution (QCD) is a withdrawal from an IRA that’s paid directly to a charitable organization.  A QCD withdrawal counts toward your RMDs and, more importantly, when you make a qualified charitable distribution, you will receive a 1099-R that shows total distribution and $0 tax!  Not only does that make your distribution tax-free – as you would expect for any charitable donation – but also it doesn’t count toward your income!  A QCD has some added benefits for retirees receiving Social Security benefits, paying for Medicare or deriving the vast majority of their income from investments. 

Rancho Coastal Humane Society is a qualified 501(c)(3) charity. Many of our loyal donors incorporate QCDs into their charitable giving plans. A QCD could make good financial sense for you AND make a meaningful difference in the lives of our shelter animals. With your help, we can send our dogs, cats and rabbits home again, and keep family pets safe, healthy and at home – where all companion animals belong!    

There is a 50% tax penalty lurking in this alphabet soup of IRS, IRA, RMD and QCD, so it’s best to consult with your financial advisor about these rules as they can be quite complex depending on your situation.