![Holistiplan Logo (800x200 px).webp]](https://help.holistiplan.com/hs-fs/hubfs/Holistiplan%20Logo%20(800x200%20px).webp?width=160&height=40&name=Holistiplan%20Logo%20(800x200%20px).webp){kind=small}
Taxpayers who are over age 70.5 can direct charitable contributions to go directly from their IRAs to a recipient charity. Those taxpayers do not get a corresponding charitable deduction on Schedule A, but QCDs are excluded from taxable income.
TAX TIP: Since charitable deductions taken on Schedule A show up on line 12 of Form 1040, after line 11 (AGI), itemized deductions for charity do not reduce Adjusted Gross Income (AGI), and in turn, do not reduce any Modified Adjusted Gross Income (MAGI) calculated amounts used for other planning strategies.
QCDs may therefore have the effect of reducing otherwise taxable IRA distributions, if already being made, reducing AGI and MAGI, which can have positive implication for other planning strategies that depend on those MAGI thresholds.
To model QCDs within scenario analysis, click on the pencil icon in the "IRA Distributions" field in the 1040 Income section.
Users should enter the amount of any taxable IRA distributions in the top section of the worksheet, and any Qualified Charitable Distributions in the bottom section of the worksheet. This means you should reduce the amount of Taxable IRA Distribution by the amount of Qualified Charitable Distributions (QCDs).
Note that the QCD field does not impact the federal tax calculation! You must manually calculate the taxable IRA distribution. This is done by taking the gross distribution less the QCD to determine the taxable amount.
Starting in 2025, Robert Retiree will take a gross distribution from his IRA of $65,000. Of the total gross distribution, $20,000 is a QCD. This results in a taxable IRA distribution of $45,000.
In the sample shown below, we've entered a taxable IRA distribution for Taxpayer 1 of $45,000 and a QCD of $20,000, for a total IRA distribution of $65,000.
Additionally, the worksheet will show you in real time the tax savings of a QCD compared to taking the same amount as a taxable distribution and making a comparable charitable deduction on Schedule A (a $4,726 savings in the above example).
Scenario Analysis now illustrates the gross distribution of $65,000, with the taxable distribution ($45,000) and the non-taxable QCD amount ($20,000) as seen below.
QCDs are only for taxpayers age 70.5 or older. If you enter a QCD for an individual younger than 70.5, you will see a clickable warning alerting you that the individual is not 70.5 or older.
