Doing a QCD before age 72

Submitted by Florina Chuy on Wed, 2020-01-08 01:15

With the SECURE Act, is there a benefit (besides just being charitable) with doing a QCD at age 70.5 since it won’t lower your AGI till you are 72? Is this more tax-efficient than claiming charitable contributions if they are greater than your Standard Deduction?



Submitted by Alan - IRA critic on Thu, 2020-01-09 15:39

  • The choice is the same as in an RMD year in which the donation would be larger than the RMD amount. If you assume the taxpayer already has itemized deductions that at least total the standard deduction, so a non QCD donation could be fully itemized, the decision boils down to marginal tax rates for the current year v. future years, similar to a Roth conversion decision.
  • If the marginal rate is higher this year, then donating from outside the IRA will produce a current year tax savings at the current marginal rate, whereas a QCD will not. On the other hand, a QCD will draw down the IRA balance and reduce future RMDs and therefore income at future marginal rates spread over several years, similar to a Roth conversion. Large donations from non IRA assets may also be subject to % AGI limits with amounts in excess of those limits subject to carryover. Of course, most seniors will not have itemized deductions high enough to consider donating outside the IRA.


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