I want to take a significant withdrawal from my 401(k) account and then make a charitable contribution for the same amount. How will this affect my tax liability?
If a charitable contribution is funded by a distribution from a 401(k), the distribution from the 401(k) will add to AGI and the charitable contribution will separately be reported as a deduction on Schedule A. The addition to AGI can increase the taxability of Social Security income, among other things, so the Schedule A deduction might not entirely offset the income to produce a zero net change in tax liability. The increase in AGI can also affect the amount you must pay for Medicare two years later.
A Qualified Charitable Distribution which is excludible from income can only be made from an IRA, not from a 401(k), and can only be made after the IRA owner has reached age 70½. You can roll over amounts from the 401(k) to the IRA after satisfying any RMD from the 401(k) for the year, then make a QCD from the IRA.
If a charitable contribution is funded by a distribution from a 401(k), the distribution from the 401(k) will add to AGI and the charitable contribution will separately be reported as a deduction on Schedule A. The addition to AGI can increase the taxability of Social Security income, among other things, so the Schedule A deduction might not entirely offset the income to produce a zero net change in tax liability. The increase in AGI can also affect the amount you must pay for Medicare two years later.
A Qualified Charitable Distribution which is excludible from income can only be made from an IRA, not from a 401(k), and can only be made after the IRA owner has reached age 70½. You can roll over amounts from the 401(k) to the IRA after satisfying any RMD from the 401(k) for the year, then make a QCD from the IRA.