Charitable Giving: QCD vs Itemized

Submitted by brcwm on Thu, 2023-07-27 13:47

Client is
– over the age of 73
– Income in excess of $750k/yr
– needs to take a sizeable RMD distribution (>$100k)
– very charitably minded (giving >$200k/yr)
– Beneficiary of IRA goes partially to charity (~20% of end of life amt)

Is there any reason NOT to do a QCD? CPA is recommending to take the RMD in cash, then give cash to increase the itemized deductions.



Submitted by Alan - IRA critic on Thu, 2023-07-27 15:24

  • There is no downside for the QCD, however at this income level the itemized deduction could at least equal the QCD for determining taxable income assuming that client has OTHER itemized deductions at least equal to the standard deduction exclusive of the cash donation. However, if client has any IRA basis, the QCD would result in more basis remaining in future years and less basis being applied this year to non QCD IRA distributions.
  • Itemizing instead of using a QCD will increase AGI and possibly exceed an AGI based threshold, although the NIIT threshold will probably be exceeded either way, and the max 85% of SS income will be taxable either way. It’s also possible that if client itemizes the 60% of AGI limit for charitable contributions could be breached resulting in a carryover. Therefore, unless client has significant basis in the IRA, the QCD is safer. 

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