QCD scenaio post SECURE Act

Submitted by Robert Wright on Tue, 2020-01-07 00:19

Fact Pattern:

I am 71 as of 1-1-2020.

2020
$1,000 Deductible IRA Contribution. I had more than $1,000 of earned income in 2020.
$0.00 QCDs

2021
$0.00 Deductible IRA Contribution
$3,000 QCD

Question
Am I correct that under the rules of the SECURE Act, my $3,000 QCD made in 2021 will be reduced by $1,000 IRA contribution I made in 2020 and only $2,000 of the $3,000 charitable gift will be tax free in 2021?



Submitted by Alan - IRA critic on Tue, 2020-01-07 00:32

  • Yes, you are correct due to the Secure Act “anti abuse” provision contained in Sec 107 of Secure dealing with elimination of the age limit for TIRA contributions. You would have a 2000 QCD in 2021 and a 1000 taxable IRA distribution along with a possible 1000 charitable donation deduction if you can itemize. The reduction in your 2021 QCD would erase the effect of the 1000 deductible contribution.
  • Therefore, you should either make the contribution as a Roth contribution or if your MAGI is too high for a Roth contribution and you have no pre tax TIRA balance, make a non deductible contribution and convert it (back door Roth).

 

Submitted by Robert Wright on Tue, 2020-01-07 00:35

Thanks Alan.

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