I normally make Qualified Charitable Distributions (QCD) in January and then withdraw enough from my IRA to satisfy the year’s Required Minimum Distribution (RMD).
Later in the year, I decide that I would like to make another QCD to a 501(c)(3) charitable organization. Is that QCD tax-exempt?
I want to verify that the second QCD will increase the amount reported on the 1099-R as being withdrawn from the IRA. It is tax-exempt but does not change the amount of the IRA withdrawal that is taxable as ordinary income.
Anything up to a total of $100k, per year, per person in QCDs is not counted toward your AGI. Anything in excess of $100k will be counted toward your AGI and can be used as an itemized deduction on Schedule A, subject to the charitable giving rules for Schedule A.
Except if your total of QCDs is more than $100k, then you have to declare the amount more than $100k as income and take an itemized deduction for it to be tax-exempt (see above). You are correct that any non-QCD withdrawals from the IRA are taxable as ordinary income, and the QCDs do not affect the taxability of those withdrawals.
Does the QCD count for determining the amount of SSA taxed?
Not as long as the QCD is $100k or less. From the IRS Form 1040 instructions 2022 Instruction 1040 (irs.gov), here’s the worksheet to calculate taxability of SS income:
Line 4 of your 1040 is where Traditional IRA distributions are documented. Line 4a is the total amount distributed, and line 4b is the taxable amount. QCDs are included on line 4a, and up to $100k of QCDs are excluded from line 4b by writing “QCD” next to line 4b. You can see on line 3 of the worksheet that only the amount from your 1040 line 4b is included when calculating income to determine SS taxability, and there is no add back for QCDs like there is on line 4 of the worksheet for the tax exempt interest documented on 1040 line 2a.
This, of course is all under current law - which may change if Congress ever gets around to updating SS.
Thanks AJ, adding 20 more thanks!!!