I'm sorry, but really need to know if electing to have a portion of an RMD distributed directly to charity reduces the amount of Gross income, or Adjusted Gross Income (AGI), as a tool to reduce income for the purpose of means testing. Here is an example of what I am trying to ask. Say my yearly pension and SS combined are $50,000. My RMD for 2017 is $35,000. I elect to have Vanguard distribute $5000 of the RMD directly to my local church as a charitable contribution. Will turbo tax calculate my gross income as $85,000 or $80,000? What about calculation of the Adjusted Gross Income (AGI)?
I am now going to quote some information related by the Dallas financial columnist, Scott Burns, in one of his columns entitled, "Required minimum distributions can change tax bracket." As a single filer, using federal income tax rates in 2013, everything between $36,250 and $87,850, is taxed at 25% ($72,500 to $146,400 for joint filers). RMDs in the future will move my total income above $87,850 and into the higher marginal tax rate of 28%. So this is one of the reason for my questions posted above. Will the $5000 RMD charitable contribution move the tax bracket goal post back $5000 to give more breathing room before the $87,850 milestone is reached? Mr. Burns also presents another strategy to delay reaching that higher tax bracket -- "You can create some flexibility by making withdrawals from your qualified accounts up to the edge of the 28% tax bracket. You can do a Roth conversion with the withdrawals until you reach the age for required minimum distributions." -- That is another suggestion I plan to implement.
In that same newspaper column, Scott Burns also writes the following -- "The other milestone you want to watch for is the threshold rate for having to pay a surcharge on your Medicare insurance. This year the basic monthly premium for Medicare Part B for most people is $104.90. The Part B premium will rise to $146.90 for joint filers with taxable incomes of $170,000 ($85,000 for single taxpayers), and there will be a Medicare part D surcharge of an additional $11.60 a month. Required minimum distributions may drive your taxable income into this range, so some amount of Roth conversion will reduce the odds this will happen."
I read where the House Republican have presented a proposal to lower the threshold for the Medicare premium rise to around $80,000 for single taxpayers. (I've forgotten the proposed amount for joint filers.) So I'm getting back to that important question of where does the $5000 RMD charitable contribution put one's income for the purposes of federal income tax means testing in determining these additional charges, at $80,000 or $85,000?