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Alphabet Soup and Timing: 70½, IRA, 108, QCD, 73, RMD, 25
Posted July 2025
When you are coordinating distributions from your IRA (or other qualified retirement plan), knowing the following numbers and terms is important—and the timing of your distribution is key to avoiding potential tax penalties. Below is a breakdown of these essential numbers, letters, and terms.
- IRA: An individual retirement account is a tax-advantaged savings plan that allows you to save for retirement. You can create an IRA during your working years and make contributions to it while you are working. In addition, many people roll over their 401(k)s and 403(b)s into a single IRA when they retire. This allows people to consolidate their various retirement funds, and it provides them with more flexibility in the investment of their retirement funds.
- QCD: Qualified charitable distributions are sometimes referred to as an “IRA charitable rollover.” They have been available since 2006 and allow IRA holders to make distributions from their IRAs directly to a qualified charitable organization. The IRA holders do not include the charitable distribution in their income, which is the functional equivalent of a 100% deduction. (Please note, however, that IRA holders may not claim a charitable deduction for their QCDs).
- 70½: You cannot make a QCD until you turn 70½. For example, if your 70th birthday falls on May 14, you cannot make a QCD until November 14. If your timing is off and you attempt to make a QCD before November 14, you will be required to include the amount of the charitable distribution in your income for that year. It will be considered a charitable distribution but not a qualified charitable distribution. Even though it will be taxable income, you can claim it as a charitable deduction if you itemize your deductions.
- $108,000: This is the maximum amount for a QCD in 2025. If you have multiple IRAs and make QCDs from each of them, the sum of all of those QCDs cannot exceed $108,000. If you and your spouse each have an IRA, each of you can make QCDs up to $108,000 ($216,000 total). This number is indexed for inflation and changes each year.
- RMD: You must take a required minimum distribution from your IRA each year. Your RMD is calculated by the IRS by dividing your IRA balance by a distribution factor based on your age.
- 73: You must begin to take an RMD in the year in which you turn 73. The IRS gives you a little bit of flexibility in the first year you must take an RMD. You can take your first RMD by April 1 of the year following the year you turn 73. For example, assume you turn 73 in March of 2025. You have until April 1 of 2026 to take your first RMD. However, you will also need to take an RMD for 2026, so you will be taking two RMDs in 2026 should you choose to delay your initial RMD in 2025. All future RMDs must be taken by December 31 of each year.
- 25%: If you miss the deadline to take an RMD, you will be assessed a 25% excise tax for your failure to take the RMD on time. For example, if your RMD is $10,000 and you forget to take it one year, you must pay $2,500 in excise taxes. However, you can reduce this penalty to 10% if you make the RMD withdrawal within two years of the missed RMD or if the IRS approves a waiver that you file with a reasonable cause for missing the RMD deadline.
- QCD-RMD Timing: Your QCD can cover some or all of your RMD if you properly time the distributions. For example, Mary has an RMD of $10,000. Her $10,000 QCD to support our work will also serve as her RMD, generally speaking. If, however, Mary takes out her $10,000 RMD in January and makes a $10,000 QCD later in the year, the IRS deems that her January withdrawal covers her RMD and she will be required to claim that as income. Her later QCD will still count, but it will not cover her RMD.
- IRMAA-QCD Timing: The income-related monthly adjustment amount is an additional premium that some Medicare beneficiaries pay based on their income. In 2025 Medicare beneficiaries with income over $106,000 for single tax filers or $212,000 for joint filers will pay this surcharge. As discussed above, coordination of a QCD with your RMD can reduce income you would otherwise be required to claim. This income reduction can also be calculated to potentially lower your IRMAA premium surcharge.
If you would like to learn more about how a QCD might be of greatest benefit to your specific circumstances, please contact our office for a no-obligation consultation. We would be happy to assist you.
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