Mega QCD/CARES act exemption to exceed 60% AGI or 100k QCD limit in 2021
Regarding the topic above. I have a client who will be exceeding the usual $100k QCD limit [ $ 700k contrib total ] from his IRA to take advantage of this opportunity.
He is above 72 and has already met his RMD earlier in the year.
The question is this: Is it to his advantage to STILL utilize the $100k QCD rule and pay that DIRECTLY to the charity [ in order to reduce his AGI ] then, in turn, he can send them the additional $ 600k directly…
OR…
Does it not matter for 1040 tax implications and for ease, Can take the entire $ 700k paid to him, and in turn to the charitable org ?
I have Ed’s Jul 6, 2021 article on the subject as a reference.
Permalink Submitted by Alan - IRA critic on Fri, 2021-12-17 17:27
Unfortuneately, he should have made his 100k QCD first, and it would have offset his RMD AGI up to 100k. I assume the entire 700k will be distributed from the IRA. His AGI will now include the following depending on his choice of using a QCD for 100k or not.
Executing a 100k QCD now – AGI includes taxable RMD + 600k IRA distribution. Taxable income includes just the RMD since itemizing the deduction will offset the 600k distribution.
No QCD – AGI includes taxable RMD + 700k IRA distribution. Taxable income just the RMD.
So taxable income will be the same either way, but AGI for purposes such as 2023 IRMAA premium and other possible AGI phaseouts will be 100k lower with a 100k QCD.
Mechanically, the IRA distribution could be done as it the entire 700k was a QCD, but only the 100k max can be reported as a QCD.