Large donation 2023 tax question and ACA and Divorce and what a mess...

[silvor]

Recently divorced early January 2023. My ex wants to gift $60k to a charity, and she wanted to do it from an Inherited IRA. From what I understand, she can't donate the IRA, she has to take a distribution, then donate.

Her job is a low paying part time job what will end early summer. She will make around $10k from it in 2023.

2) her next job is not known, but I'm guessing she can get something in the 50k range, but for 2023 we're talking about $30k total between the 2 jobs.

Here are the problems I see...
1) on the IRS site she can deduct 60% of her AGI. So if her salary is $30k and her distribution is $60k and the 60k goes to charity, she can deduct $54k? Or is it 60% of the 30k?

2) she is on ACA. Will the above scenario screw that up? She hopes to have full benefits at the new job, but who knows.

I told her to wait until the end of the year, but she is adamant to do this now.

We planned on filing married filing separately for 2023. I think we have to file as "married" separate or joint, no matter from what I understand.

I know, I know, ask a CPA. We never used one as I always did the taxes since we were both W2 earners. And to get a CPA on the phone at this time of year is impossible.

 

[RetMD21]

I don't think you have to file as married

https://www.irs.gov/newsroom/some-tax-considerations-for-people-who-are-separating-or-divorcing

 

[athena53]

How old is she? You can do a QCD directly from an IRA to a charity after 70 1/2, but not before.

Her deduction would be limited to 50% of her salary and other income BEFORE any deductions, so $15K if all she makes is $30K. AGI is pretty much what you take in from all sources, other than non-taxable bond interest. I wish you could reduce it by deductions but you can't.

I agree that you can file jointly or separately for 2023. I filed separately the year I divorced because I knew my Ex wouldn't file at all and he'd owe state taxes on the capital gain on our house- back then NJ didn't exempt any part of the gain unless you bought another house. I did. He didn't.

 

[cathy63]

Your ex-wife can take a donation for up to 60% of her AGI on her 2023 tax return.

If she earns $30K and takes an IRA distribution of $60K, her AGI will be around $90K and she can take a charitable contribution deduction of $54K. She is not old enough do this as a QCD (I know that because you said she's on ACA, not Medicare).

Her AGI for ACA purposes will include the IRA distribution, so it will also be $90K. The max she will have to pay for health insurance is 8.5% of her income, so $7650. Whether that's "screwing it up" or not, I cannot say. What was she expecting to pay? Is she o.k. paying up to $7650?

If your final divorce decree is issued in 2023, then you both must file as Single or Head of Household (if you qualify). You cannot file as Married Filing Separately or Married Filing Jointly unless you are legally married on the last day of the year.

 

[athena53]

Your ex-wife can take a donation for up to 60% of her AGI on her 2023 tax return.

If she earns $30K and takes an IRA distribution of $60K, her AGI will be around $90K and she can take a charitable contribution deduction of $54K. She is not old enough do this as a QCD (I know that because you said she's on ACA, not Medicare).

Oops. I messed up. The distribution is part of her AGI which includes "income from all sources". Cathy got it right.

 

[silvor]

Your ex-wife can take a donation for up to 60% of her AGI on her 2023 tax return.

If she earns $30K and takes an IRA distribution of $60K, her AGI will be around $90K and she can take a charitable contribution deduction of $54K. She is not old enough do this as a QCD (I know that because you said she's on ACA, not Medicare).

Her AGI for ACA purposes will include the IRA distribution, so it will also be $90K. The max she will have to pay for health insurance is 8.5% of her income, so $7650. Whether that's "screwing it up" or not, I cannot say. What was she expecting to pay? Is she o.k. paying up to $7650?

If your final divorce decree is issued in 2023, then you both must file as Single or Head of Household (if you qualify). You cannot file as Married Filing Separately or Married Filing Jointly unless you are legally married on the last day of the year.

Thank yo so much!!

 

[Sunset]

Just divorced and she wants to give away $60K ...

Either you folks are very very very "comfortable" , or she is getting scammed, or gone off the deep end.

With her low earnings, I don't see any need to donate such a large sum. What's she doing next year ?

 

[silvor]

Just divorced and she wants to give away $60K ...

Either you folks are very very very "comfortable" , or she is getting scammed, or gone off the deep end.

We are not comfortable at all. I want to be careful how I word this as I don't mean it as a slight to anyone's belief system. But she believes in giving a tithe (10%) to the church. That was one of our big issues in the marriage. I don't disagree with the tithe, but living on one income with kids and to be constantly told 'you aren't giving enough' put a lot of extra stress on top.

With her low earnings, I don't see any need to donate such a large sum. What's she doing next year ?

The plan is "get a job". Which is so vague. There really is no plan. She even said something about just working part time and riding out the money until social security.

I told her to wait or just give 10% of your income, but she is adamant to do this now. Her friends and family are of no help and she won't listen to me.

 

[Dash man]

We are not comfortable at all. I want to be careful how I word this as I don't mean it as a slight to anyone's belief system. But she believes in giving a tithe (10%) to the church. That was one of our big issues in the marriage. I don't disagree with the tithe, but living on one income with kids and to be constantly told 'you aren't giving enough' put a lot of extra stress on top.





The plan is "get a job". Which is so vague. There really is no plan. She even said something about just working part time and riding out the money until social security.



I told her to wait or just give 10% of your income, but she is adamant to do this now. Her friends and family are of no help and she won't listen to me.

Churches need support, but not at the risk of your own livelihood. I suggest you talk to her about investing it and giving the tithe from the earnings. She can also volunteer in lieu of tithes.

 

[CardsFan]

Churches need support, but not at the risk of your own livelihood. I suggest you talk to her about investing it and giving the tithe from the earnings. She can also volunteer in lieu of tithes.

Or, just quietly walk away and let her live with her own decisions.

 

[Sunset]

We are not comfortable at all. .... But she believes in giving a tithe (10%) to the church. That was one of our big issues in the marriage. I don't disagree with the tithe, but living on one income with kids and to be constantly told 'you aren't giving enough' put a lot of extra stress on top.
..

I told her to wait or just give 10% of your income, but she is adamant to do this now. Her friends and family are of no help and she won't listen to me.

I get the tithe aspect, but if she is thinking to give $60K because she is getting $600K from the IRA, that is wrong thinking as that money was already tithe'd or donated while being earned by the owner. Otherwise how did she come up with the $60K number

Worst thing, is after she has failed to provide for the kids, due to a lack of money left in her hands, she will look to you for the $$.

 

[marinauser]

Isn't the key word here "ex-wife". I wouldn't involve myself at all given that any advice you give will ultimately be wrong - regardless of the outcome.

 

[athena53]

Isn't the key word here "ex-wife". I wouldn't involve myself at all given that any advice you give will ultimately be wrong - regardless of the outcome.

Except that if they're the OP's kids he DOES have a stake in how the ex-wife spends her money.

When I was a single mother with no child support, living in a HCOL area (Bergen County, NJ) I belonged to a church and although I made a decent annual pledge it was nowhere near a tithe. I had to consider myself and my son first. Not sure who was telling your Ex that what she donated wasn't enough but that's just plain wrong. I never got that message at my church even though they could have made an educated guess at my compensation given my profession. My pledge now is far more than a tithe but I have an ample charity budget and it comes out of that.

 

[marinauser]

He actually has absolutely no say in how she spends her money. He has some say in how child support monies are spent. If he believes that her spending is putting his children in danger, then there is a way to properly intervene. Otherwise, the answer is to stay out of it. Assuming any children are young enough, their only joint exercise is to co-parent.

 

[silvor]

To clarify, no child support as the last one is graduating in A Few months. We’re still in the same house until then.

I have decided I’m out of it with the exception of telling her the options to take the distribution. Still, we have college age kids and she thinks I should pay for college, their cars etc. not going to happen!

 

[Sunset]

To clarify, no child support as the last one is graduating in A Few months. We’re still in the same house until then.

I have decided I’m out of it with the exception of telling her the options to take the distribution. Still, we have college age kids and she thinks I should pay for college, their cars etc. not going to happen!

It's a tough situation.

Charity begins at home. She should use some of that earmarked $60K for college charity.