QCD AntiAbuse Rule

Submitted by Rich Phillips on Mon, 2023-02-20 17:39

A husband aged 70 1/2 who is working and receiving earned income will make and, in the future, make contributions to his 403(b) wants to make QCD’s from his separate Nondeductible IRA. The Nondeductible IRA has not received any contributions to it for over 20 years and will not in the future. Can the husband make a QCD out of the IRA while still contributing to his 403(b); and eventually when done working continue making QCD’s without any offset requiring reporting the QCD as RMD income.
Further; wife having only a nondeductible IRA can she make a QCD at age 70 1/2 without any issue if they file a joint tax return.



Submitted by Alan - IRA critic on Mon, 2023-02-20 18:08

  • Since husband is not making any deductible IRA contributions at 70.5 or later, he can do a QCD from his IRA, but only to the extent of the pre tax amount in all of his IRAs. IRA basis as reported on Form 8606 over the years is not eligible for QCD treatment, but his entire pre tax amount is applied to QCDs. There is no prorating of basis for QCDs and QCD distributions are not reported on Form 8606.
  • Same rules apply to wife. QCDs can only be done to the extent of gains or other pre tax amounts in her IRA. 
  • In both cases, if a spouse has more than one IRA, they are treated as a single combined IRA account for QCD and other distribution reporting. 
  • There are no non deductible IRA accounts, only non deductible contributions. Such contributions will normally generate gains over the years. 
  • Each spouse should have filed an 8606 for each year they made non deductible contributions. The amounts on line 14 of the last 8606 filed is their basis and cannot be used as QCDs.

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