QCDs and Deductible IRA Contributions
Reviewing the QCD Reminders and Pitfalls – Ed Slott and Company, LLC (irahelp.com) article, and noticed this part:
The amount of the deductible contribution will offset the same amount of a QCD, no matter how far into the future the QCD is done.
Can anyone explain this in greater detail? So, if someone made a post-70.5 deductible IRA contribution, and wanted to satisfy their age 73 RMD by making a QCD, they would have to net out the contributions made in the prior two years?
Permalink Submitted by Alan - IRA critic on Thu, 2024-04-04 19:33
Yes, the intent of this Secure Act rule is to prevent a taxpayer from making a deductible TIRA contribution, then using a QCD of these amounts to eliminate taxes on a later IRA distribution. Therefore, if a taxpayer makes a total of 15,000 of deductible contributions starting at age 70, the first 15,000 of QCDs done anytime after the contributions cannot be treated or reported as a QCD, but could be claimed as an itemized deduction if the taxpayer itemizes. This will require the taxpayer to keep track of the deducted amounts and the offsets of QCDs until the QCDs equal the deducted amount.
This anti abuse provision is probably unnecessary since very few taxpayers with enough funds to make QCDs do not already have an IRA balance far in excess of deductible contributions they would make after age 69.