Comparing QCD’s to Alternating Itemizing and Taking Standard Deduction
Is anyone aware of any software that allows the user to compare the differences between using QCD’s for their RMD’s vs. taking normal RMD’s and alternating itemizing deductions one year and taking the Standard deduction the following year 2, etc? If not, can you please refer me to a vendor that offers this software? Thank you.
Permalink Submitted by Alan - IRA critic on Mon, 2022-05-02 01:43
I am not aware of any such software, and I doubt it exists. For federal taxes in RMD years, I doubt there is any scenario under which not claiming a QCD and instead itemizing would lower taxable income. You might still bunch your itemized deductions, but they should only include donations that do not qualify for a QCD.
On second thought, if you are in a position to make deductible TIRA contributions at age 70.5 which would reduce your QCDs by the Secure Act anti abuse provision, you might benefit by passing on the QCD and itemizing. But that would still cost you after you retire and cannot make such TIRA contributions, since any QCDs you do into the future would be offset up to the total of prior deductible TIRA contributions you claimed back to year 70.5.
The 1 or 2 years between 70.5 and the first RMD distribution year at 72 are different because there are no RMDs for those years. With no RMDs to offset and if you are not taking a non RMD IRA distribution, including donations as itemized deductions and not claiming a QCD might be of benefit. But not if you are not taking TIRA distributions at all.
Remember, a QCD reduces both AGI and taxable income, but an itemized deduction only reduces taxable income. The AGI reduction can reduce SS taxes, IRMAA, and other types of taxes based on exceeding an AGI threshold. A QCD will also concentrate your IRA basis, if you have basis, and there are no AGI % limitations, just the 100k QCD limit.
There could also be some state issues with those that have taxes, but various retirement income exemptions. Not sure if those states would all allow a deduction for state purposes of a QCD claimed on the federal 1040.