Post 70.5 QCDs and Contributions
I am a little confused on the rules for QCDs and post 70.5 contributions. Is a client allowed to make deductible contributions to TIRA and in a later year make QCDs or are they not allowed for any post 70.5 contributions? Thanks in advance -m
Permalink Submitted by Alan - IRA critic on Tue, 2024-08-27 15:58
The SECURE Act contains an anti-abuse rule that coordinates post-70 ½ deductible Traditional IRA contributions with QCDs. Under the rule, any QCD will be reduced by the cumulative amount of total post-70 ½ deductible Traditional IRA contributions (but not below $0) that have not already been used to offset an earlier QCD. The intent is to ensure that individuals don’t just ‘recycle’ post-70 ½ IRA contributions into subsequent QCDs.
In other words, up to the amount of age 70+ deductible contributions donations otherwise done as a QCD cannot be reported as QCDs on the tax return, and the distributions will be taxable. The amount of disallowed QCDs can be reported as itemized deductions, however most seniors cannot itemize.
This rule is overkill because seniors that can afford to make QCDs generally have far more in their IRAs than contributions made after 70, so very few would be recycling these contributions. But due to this rule, eligible taxpayers should be making Roth contributions, not non deductible TIRA contributions.