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Is my RMD QCD taxable if I also make an IRA contribution?

Forum|Forum|5 years ago
February 25, 2021
2 replies
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My wife is 72 years old, but she still works. She wants to make a $4,000 contribution to her IRA. She can make the contribution, but this means that $4,000 of her RMD QCD will be taxable. I think Turbotax missed this weird situation, but I have researched it carefully:

https://www.kitces.com/blog/secure-act-qualified-charitable-distributions-qcd-ira-contribution-age-repeal-70-1-2-[product key removed]tion/

Google "QCD anti-abuse provision" to learn more about this issue. This issue is not addressed by Turbotax, so this is a bug that needs to be fixed!

"For every dollar you add to your IRA past age 70 1/2, the IRS will remove the QCD tax shield for later QCDs.

IRA

Best answer by dmertz

TurboTax does not support this anti-abuse provision. It has nothing to do with RMDs or being able to exclude the entire QCD from taxable income under these circumstances. Under these circumstances, some or all of the QCD is taxable.

M

mglauner

For your 2020 return, no 1099-R distribution is considered RMD, so don't indicate that when you make your entry.

Click this link for more info on RMD for 2020.

After entering your 1099-R, the screen that asks whether you transferred any of the distribution to charity doesn't say "QCD," but that's what it's about.

If you answer that you transferred part of the distribution to charity, the next screen will ask you how much was transferred to charity.

This will not be taxable.

D

dmertzAnswer

Employee

TurboTax does not support this anti-abuse provision. It has nothing to do with RMDs or being able to exclude the entire QCD from taxable income under these circumstances. Under these circumstances, some or all of the QCD is taxable.

D

dmertz

Employee

Note that there also doesn't yet seem to be any guidance from the IRS on how to report the taxable portion of a QCD.

C

Caveman1949Author

Under the Secure Act, working people can contribute to a regular IRA if they are now over age 70.5.

However, if a person EVER makes a tax-deductible contribution to an IRA after age 70.5, then the amount of the QCD that can be excluded from taxable income is reduced by that amount contributed to the IRA. IRS section 408(d)(8)(A)

The taxable amount of the donation therefore could be an itemized deduction if one can itemize.