How do I adjust the cost basis on a nondeductible IRA when I make a QCD from the IRA??

Forum|Forum|5 years ago
March 8, 2021
2 replies
0 views

The entire QCD which was my RMD for the year, was deducted from the cost basis.I thought QCDs are considered to come out of taxable IRA funds first.

ColeenD3

Please see this answer from dmertz:

After clicking the Continue button on the Your 1099-R entries page, did you enter a year-end value that is more than your basis in nondeductible traditional IRA contributions? If you made no traditional IRA distributions other than the amount that you reported as QCD, TurboTax will fail to ask for your year-end balance. You'll need to first enter a QCD amount of less than the full distribution amount, answer TurboTax's questions regarding basis and year-end balance, then edit the Form 1099-R to correct your reported QCD amount.

QCDs can be no more than the amount that would otherwise be taxable if all of the money was distributed from your traditional IRAs during the year. If the amount sent to charity dips into your basis, the portion that is basis must not be reported as a QCD but instead must be reported as a Schedule A deduction. Unfortunately, TurboTax does not do this calculation for you. You'll have to determine the maximum QCD amount yourself, enter that amount as QCD and enter the remaining amount transferred to charity as a Schedule A deduction.

J

jeolp

I didn't notice this "bug" in Turbo Tax until after I had filed my return. All of my IRA distribution went to charities. As a result, Turbo Tax reduced my basis by the full amount of the distribution. My 2020 return is correct, but for 2021 and beyond, my basis will be lower than the correct amount by the amount of my 2020 distribution. How can I correct this if I want to continue using Turbo Tax and continue to import the history for my 2021 return?

J

jeolp

I don't know if anyone has responded to to my Reply. My 2020 return has been filed and accepted by the IRS. I need to know what to do to correct my basis in Turbo Tax for 2021 and beyond.

D

dmertz

Employee

Since a QCD can only come from otherwise taxable amounts, there is no change in your basis in traditional IRA contributions from making a QCD. If your the transfer to the charity is more than the amount of pre-tax money in your traditional IRAs, report as QCD only the amount that is pre-tax and take a charitable deduction for the portion that comes from basis and leaves only basis in your traditional IRAs.

Since you apparently had some pre-tax money in your traditional IRAs, TurboTax reducing your basis by the amount that was transferred to charity means that you have not told TurboTax your year-end balance in traditional IRAs. Click the Continue button on the Your 1099-R Entries page in the CD/download version or the Review You 1099-R Items page in online TurboTax to reach the page that asks for your year-end balance.