IRA Qualified Charitable Distribution

[ohgillian]

Does anyone know about making a qualified charitable distribution from an IRA, and what the point is? I can't get my head around the math of the benefit of doing a QCD vs just taking the RMD as cash, and then donating it. I know this is kind of a niche question, but I thought I'd throw it out here anyway. Thanks.

ETA: I itemize; maybe the benefit is for non-itemizers? 

[farmvillelover]

Some of my clients that are required to take RMDs do this to lower their taxable income, and I'm almost positive that they aren't required to itemize deductions to benefit from QCDs.

[ohgillian]

Jul 25, 2019 13:00:01 GMT -5 farmvillelover said:

Some of my clients that are required to take RMDs do this to lower their taxable income, and I'm almost positive that they aren't required to itemize deductions to benefit from QCDs.

Thanks for replying! Do you know what the benefit is? It seems like these are the same bottom line scenario:

I take my $4500 RMD in case, write a check for $4500 to X charity, and lower my taxable income by $4500.

-OR-

I donate $4500 directly from my IRA to X charity, and my taxable income is $4500 lower than it otherwise would have been.

I have a call with my financial advisor in a few weeks and I"ll ask her about this; just thinking about it today and wondering.

[farmvillelover]

No, I don't sorry. Maybe one scenario preserves your right to ACA subsidies? I don't prepare returns so I don't know the difference.

[ohgillian]

Jul 25, 2019 14:19:36 GMT -5 farmvillelover said:

No, I don't sorry. Maybe one scenario preserves your right to ACA subsidies? I don't prepare returns so I don't know the difference.

No worries, thanks for replying anyway! If I find out anything interesting from my advisor I'll report back. 

[njohnson1972]

This example shows how reducing AGI can have more impact than itemizing, especially given that many seniors no longer itemize with the increased standard deductions.  This example assumes they are contributing $15,000 to charity.  Example 2 assumes they make the donation via QCD.

[sometimesrunner]

MAGI is also used to calculate your medicare premium in retirement. It's worth jumping through the extra hoops to make the donation directly from your IRA.

[ohgillian]

Thanks for the replies. I feel like I need to qualify that I'm not a senior and I"m not in retirement yet. I have an inherited IRA that has an RMD requirement. I think that the chart that njohnson1972 posted, though, tells me that since I itemize anyway, there's no need for me to do a QCD vs just taking the cash and donating it. For my mom, though, who is a senior and doesn't itemize, then she should consider a QCD and I'll talk to her about it, esp given what sometimesrunner mentioned.