QCD and IRA Contributions after RBD

Submitted by Kevin Dempsey on Mon, 2023-10-30 12:23

Client, age 80, is still working and makes deductible IRA contributions. Also makes Annual QCDs. I heard that this scenario has tax implications. Can you enlighten us? Thanks!



Submitted by Alan - IRA critic on Mon, 2023-10-30 14:26

  • You are correct. The Secure Act allowed TIRA contributions to be made for the first time following attainment of RMD age, but Congress did not want to allow the deduction of the contribution while also allowing tax free QCDs to be made of those contributions. Therefore, an anti abuse provision was included that reduces QCDs to the extent of such deductible contributions made at age 70.5 or later. For example, if a 7500 deduction was taken for such a contribution, the first 7500 of QCDs whenever made would be disallowed. 
  • Therefore, the client should instead consider a Roth contribution if eligible or a non deductible TIRA contribution if not Roth eligible. Their QCDs would then not be reduced.  If client has already made a TIRA contribution, it could be recharacterized as a Roth contribution, if income eligible for a Roth contribution. 
  • While this reduction is logical, since most seniors willing to make QCDs already have fairly large IRA balances from which to make QCDs, the complexity of this reduction is probably not worth the savings to the IRS.


Submitted by [email protected] on Tue, 2023-10-31 19:24

If the taxpayer has an inherited IRA, can they choose to make the QCDs from the inherited account and make the deductible IRA contributions to their own IRA to bypass this anti-abuse rule?



Submitted by Alan - IRA critic on Tue, 2023-10-31 19:57

  • No. The QCD reduction for taxpayers who make deductible TIRA contributions applies to all QCDs of that taxpayer regardless of the QCD being made from an owned or inherited IRA. 
  • Note that married taxpayers can work around this rule if the QCD is made by the spouse that is not making a deductible IRA contribution. But there is no work around with inherited IRA QCDs of the same taxpayer.


Submitted by Jack Brown on Mon, 2023-12-04 19:14

My understanding is that a QCD amount does not have to be reduced by deductible contributions made after 70 1/2 as long as the contributions were made into a SEP IRA. Also, as long as an RMD/QCD is being made from a traditional IRA, on-going deductible contributions can continue being made into the SEP IRA.



Submitted by Alan - IRA critic on Mon, 2023-12-04 23:04

That’s correct as long as the contribution is a SEP contribution. But if a personal (non SEP) contribution is made to a SEP IRA and deducted, the QCD anti abuse provision will apply.



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