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Required Minimum Distribution

Required Minimum Distributions for 2022

Required Minimum Distributions (RMDs) are the amounts that you must withdraw each year from your Traditional IRA, employer-sponsored retirement plan "401(k)", or tax sheltered account "403(b)" plans.  

  • You must begin to take the annual distributions by April 1 of the year following the year in which you reach age 72.  This is known as your required beginning date. 
  • If you work for your employer past age 72 and are still participating in the employer's retirement "401(k)"plan, you may postpone your first distribution from that plan until April 1 of the year following the year of your retirement (as long as you are not more than a 5% owner of the employer).  Certain employer plans, like SIMPLE IRAs, require Required Minimum Distributions.
  • The SECURE Act passed in late 2019 raised the RMD age from 70 1/2 to age 72, effective January 1, 2020.    The CARES Act suspended RMDs for 2020.  Required Minimum Distributions are required in 2021. 
  • Regardless of your required beginning date, you must take subsequent distributions by December 31 of each calendar year.  You'll continue to take the annual distributions each year until your death or until your account balance is reduced to zero.  You can always withdraw more than the required minimum amount in any given year.  However, if you withdraw less than the Required Minimum Distribution, you may be subject to a 50% IRS penalty on the difference between the amount you should have taken and what you actually took.
  • The basic calculation for individual accounts provides that the required minimum distribution is determined by dividing the account balance by the distribution period.  For lifetime required minimum distributions, there is a uniform distribution period for almost all individuals of the same age.  The uniform joint lifetime distributions period table is based on the joint life and last survivor life expectancy of you and a hypothetical beneficiary 10 years younger.  However, if your sole beneficiary is your spouse and he or she is more than 10 years younger than you, a longer distribution period measured by the joint life and last survivor life expectancy of you and your spouse is permitted to be used.
  • The specific rules of RMD calculations are complex, and you should consult a tax professional regarding your situation.

For 2022, and thereafter, the IRS has issued a new life expectancy table.  The new table reduces the RMD for each age, as compared to the prior table.

IRS Updated Life Expectancy and Distribution Period Tables

New Uniform Life Tables for RMD Comparison

Qualified Charitable Distributions (QCDs)

The Pension Protection Act of 2006 first allowed taxpayers age 701/2 and older to make tax-free charitable donations directly from their IRAs.  By making a qualified charitable distribution (QCD) from an IRA directly to a qualified charitable organization, older IRA owners were allowed to exclude up to $100,000 annually from gross income.

If you are considering a QCD, here's what you need to know:

  • After reaching age 701/2, you can make QCDs of up to $100,000 per year directly from your IRA(s).
  • Qualified Charitable Distributions are available from IRA accounts.  QCD's are not available from 401(k), 403(b), or other pre-tax retirement plans.  A rollover from a qualified plan to an IRA, would allow QCD's in future years.
  • Deductible IRA contributions made for the year you reach age 701/2 and later years will reduce your annual QCD allowance. (Effective for QCDs made in a tax year beginning after 2019, the $100,000 QCD limit for that year is reduced by the aggregate amount of deductions allowed for prior tax years due to the SECURE ACT.)
  • The charity must be a "public" charity approved by and listed on www.irs.gov. Not all charities qualify.
  • Your IRA holding company must make the check payable to the charity, withhold no taxes.  The check may be sent to you, and you may forward to the charity.
  • Keep a copy of the check for your tax records and make sure you receive a letter or acknowledgement from the charity stating the amount of your gift and that no goods or services were received in exchange for it.
  • Your 1099-R (for the year the contribution was made) will report your full distribution as taxable income.  Report the full IRA distribution form the 1099-R on line 4a of your 1040, subtract the QCD amount from line 4a to get the taxable amount to report on line 4b and write QCD next to it.

Qualified Charitable Distributions carry two potential benefits:

  • Charitable gifts using a QCD may provide a tax break regardless of whether you itemize or take a standard deduction.  
  • Your modified adjusted gross income (MAGI) determines your Medicare Part B and D premiums.  A QCD reduces your MAGI, which may reduce your Medicare Part B and D premiums.

To use a Qualified Charitable Distribution:

  • Contact Knox Financial Services or your tax advisor if you have questions.
  • Compile a list of charities you plan to donate in the current tax year and stop making regular contributions to these charities since the QCD will replace them.
  • Request a QCD and take the balance (if any) of your RMD as originally planned.  The charity must cash the QCD check no later than December 31 of the current tax year.

About Qualified Charitable Distributions