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How to report complicated QCD?

Forum|Forum|7 years ago
June 4, 2019
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How can I recover the nondeductable cost basis of my IRA if I donated to a charity using QCD from my IRA acc't? My IRA is an aggregate of pretax and post tax dollars. The tax treatment of QCD uses pretax dollars. In the past I use form 8606 to calculate the tax credit for the post tax dollars.

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Best answer by macuser_22

A QCD is not taxable at all and does not touch the basis in the IRA if the entire distribution was a QCD. If only part of the distribution was a QCD and part was taken in cash then the basis will be pro-rated between the part taken in cash and the entire years end IRA value just as if only the cash part was distributed and that will be calculated on a new 8606.

If the entire distribution was a QCD then no new 8606 will be generated since the basis does not change.

macuser_22Answer

Employee

A QCD is not taxable at all and does not touch the basis in the IRA if the entire distribution was a QCD. If only part of the distribution was a QCD and part was taken in cash then the basis will be pro-rated between the part taken in cash and the entire years end IRA value just as if only the cash part was distributed and that will be calculated on a new 8606.

If the entire distribution was a QCD then no new 8606 will be generated since the basis does not change.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

D

dmertz

Employee

Also note that the amount of a QCD cannot exceed the amount of your IRA that would be taxable if your entire balance in traditional IRAs was distributed by year end. Any more than that transferred to charity must be reported as a Schedule A deduction.

For example, if you have a traditional IRA balance of $30,000 and $20,000 of that is basis, transferring $25,000 to charity will result in a $10,000 QCD and a $15,000 Schedule A charitable deduction (assuming no investment gains or losses by year end on the $5,000 remaining in the IRA). None of the distribution will be taxable. In this situation you would have to calculate the QCD amount and Schedule A deduction amount yourself; TurboTax does not do this calculation for you.