Qualified Charitable Distribution (QCD) vs. Itemizing Advantages?
Is there an inherent advantage to a QCD if the taxpayer gives more than the standard deduction and is able to itemize?
I have a client that is a single widow with a large IRA and only takes RMD’s. She gives well above the standard deduction and therefore itemizes her charitable giving.
Besides the “inherent advantage” question, am I correct that there could be other advantages? For example, she has very little income, which means that she is perhaps limited on the amount of giving she can itemize due to the 50% AGI cap.
Thanks!
Permalink Submitted by Alan - IRA critic on Wed, 2020-03-18 20:36
Even if the donation can be fully itemized and other deductions add up to the standard deduction prior to the donation, the main additional QCD benefit is the reduction of AGI by the amount of the QCD. Reduced AGI might mean reduced SS income subject to taxation, less likely to trigger IRMAA medicare premium surcharges, and perhaps a larger medical itemized deduction by reducing the amount of AGI determining the medical deduction % threshold. Further, if she has basis in her IRA, the QCD is applied against the pre tax only, thereby increasing the % of basis available for other non QCD IRA distributions.