Can qualified charitable contributions be used as required minimum distributions (RMDs) from a variable annuity tax-deferred IRA to minimize taxable income?

I have two annuities that will qualify for required minimum distributions (RMDs) in 2019. The RMDs will total approximately $16,500. My current AGI is $82,000.

How do I establish a qualified charitable contribution, and can I discontinue it anytime I want to? It is my understanding that any part of my RMDs that I use as QCC would not count as income, thereby lowering my overall taxes and increases to Medicare and Social Security. Does it make more sense to include the RMDs as income, claim my charitable contribution as a deduction and pay the additional taxes and put the balance in an investment account? These would not be new contributions. I currently pay them with my living expenses because I’m debt free.

Debt, Social Security, Investing, Annuities, IRAs
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September 2018

If I read your question correctly, you do not need your RMD money and you also like to make charitable contributions.  The QCD is made for someone like you!

You will need to ask your annuity company what their procedures are since each firm has their own paperwork.   Usually, it will involve your filling out a form listing the charities and the amount that you want them to receive.  You must be 70 1/2 or older when the money leaves your account.  The annuity firm will then issue checks to the charities and either mail them directly or give them to you to mail.  I have them mailed directly.

You will get a 1099R from the annuity company showing the 16,500 as being distributed to you.  You or your tax person will indicate that 16,500 was a QCD.  That will result in a ZERO taxable amount appearing on your tax return.  You do not claim the charitable contribution on Schedule A.

You must keep the acknowledgment letters from each charity and also DO NOT ACCEPT ANY GIFTS from the charities.  That tee shirt or CD will cost you the whole contribution that you made to the charity.

You are 100 percent correct that this may help you avoid paying higher Medicare B premiums and also state income tax.

September 2018
September 2018
September 2018