IRS releases RMD tables and QCD changes

Based on the letters I’ve received from frustrated readers, clarity and relief are now here. On Feb. 28, the IRS released its official final version of Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) (tinyurl.com/2xc7cmut), for the 2021 tax season. That’s the publication that contains the new required minimum distribution (RMD) tables that all were expecting.

Readers were looking for newly adopted tables for 2022 RMDs — they are now finally available in official format in Appendix B of the publication. Be sure to use the link I’ve provided above. You also can go to the IRS website (IRS.gov) and search for “590-B” in the Forms and Instructions section. Or call 800-TAX-FORM (8293676) to order the publication.

My November 2021 column (”We’re Not Done With RMD Changes”) noted that, according to the Nov. 12, 2020, Federal Register (tinyurl.com/493tu8p4 ), the RMD tables were being updated to “generally reflect longer life expectancies.”

Three tables are updated: Single Life Expectancy (for IRA beneficiaries); Joint Life and Last Survivor Expectancy (for owners whose spouses are more than 10 years younger and sole beneficiaries of their IRAs); and Uniform Lifetime

(for unmarried owners, married owners whose spouses aren’t more than 10 years younger, and married owners whose spouses aren’t sole beneficiaries of their IRAs).

How much of a change is involved? Here’s an example involving “Fred,” who is 80 years old and uses the Uniform Lifetime Table for determining his RMDs. The divisor used to calculate RMDs has changed for an 80-year-old from 18.7 (in the old table) to 20.2 (in the new table). In general, if the divisor goes up, the amount of RMD goes down. If Fred had an IRA balance of $600,000 at the end of 2021, his RMD for 2022 would be $29,703. If the old table were still in effect, Fred’s RMD amount would be $32,086, a difference of more than $2,300.

Another important change in the publication relates to qualified charitable distributions (QCDs), which I wrote about in early February (”Mixing QCDs and IRA Contributions”). As a reminder, a QCD involves a direct transfer from an IRA trustee to a qualified charity and often is used to offset an RMD from an IRA. For more details, see tinyurl.com/2p9ycs83 or Publication 590-B.

The draft version of Publication 590-B that had been released in January contained a worksheet for calculating how deductible contributions to IRAs after age 701⁄2 could bring adjustments to a person’s QCD. The change involving deductible IRA contributions came when the Setting Every Community Up for Retirement Enhancement

(SECURE) Act was signed into law at the end of 2019. The QCD worksheet contained an error that was corrected in the final version.

The final version also provides a more detailed picture of how deductible IRA contributions can affect the amount of QCD that can be excluded from gross income on a tax return for a given year.

Those taxpayers who have made or are considering making QCDs should read through Pages 14 to 16 of the final Publication 590-B, especially the “Offset of QCDs by amounts contributed after age 70 1⁄2” section, which features the example of “Jim” and some sample worksheets. The worksheets show how the calculations involving QCDs and deductible IRA contributions are done over a two-year period.

The release of 590-B brings up an important reminder: Whether it be RMDs, QCDs or deductible contributions to an IRA, always be sure to consult with your tax adviser before acting, especially in this time of change.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford) and author, welcomes your questions/comments (readers@juliejason.com). Her awards include the 2021 Clarion Award, symbolizing excellence in clear, concise communications. Her latest book, a curated collection of Julie’s columns, is “Retire Securely: Insights on Money Management From an Award-Winning Financial Columnist.” To hear Julie speak, visit juliejason.com/events.