Tax Calculation for QCD from “mixed” Trad IRA
I’ve seen articles about how to calculate the taxable amount of an RMD when the distribution from the Traditional IRA contains both pre-tax and post-tax dollars.
I’ve seen articles about how taking a QCD from your Traditional IRA reduces the taxable amount of your RMD to be reported to the IRS.
But I have not seen anything (and research has come up empty) about taking QCDs from a “mixed” Traditional IRA. Specifically, (a) how to calculate the taxable amount of the RMD to be reported on Form 1040 and (b) how to calculate the remaining basis of the Traditional IRA.
Permalink Submitted by Alan - IRA critic on Thu, 2022-01-13 19:28
SInce the QCD is composed of just pre tax amounts, the amount of the QCD is not reported as a distribution on line 7 of Form 8606. The 8606 will calculate the taxable portion of the non QCD portion of annual distributions, and that taxable amount will be the total amount included in taxable income.
Let’s say your TIRA basis is 10% of the adjusted year end value, and 50% of your RMD were done as QCDs. In this example, 90% of 50% of gross distributions would be taxable, which is 45% of the total distribution. Since no basis is included in the QCD, your remaining basis on line 14 of the 8606 will be higher than if you had not done any QCDs.