How to apply rules for QCDs from IRAs with both pretax and post tax funds | Ed Slott and Company, LLC

How to apply rules for QCDs from IRAs with both pretax and post tax funds

I understand that QCDs only apply to taxable amounts in your IRA, but don't understand how to apply the rule. Let's say you have an IRA with $100K of which $20K is post tax and your RMD is $10K. Your RMD would add $8K to your taxable income.
Now let's say you want to make a $5K QCD and take out $5K to satisfy your remaining RMD. Would your taxable income only raise by $5K X .8 =$4K? Do you track all this on the subsequent 8606 to track basis?
Thx Pete

This is calculated on Form 8606, but the result is not $4K taxable.  Both the QCD and non-QCD distributions contribute to reducing the year-end TIRA value, but only the non-QCD distribution is reported on Form 8606.  In your example (assuming no investment gain or loss), the $100K total in TIRAs is reduced by the distributions, resulting in a $90K year-end value, so the non-taxable amount of the non-QCD distribution is 20K / (90K + 5K) = 21.05% of the $5K non-QCD distribution, or $1,053.  That makes the remaining $3,947 of the non-QCD distribution the taxable amount.

(pre/post tax) funds.  What would the 8606 look like if you made the QCD for the entire $10K RMD?

Assuming no other distributions during the year, if the entire $10K distributed was QCD, no Form 8606 would be filed.


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