Portion of 403B to IRA to make QCD | Ed Slott and Company, LLC

Portion of 403B to IRA to make QCD

If you split money off of 403B to an IRA in order to make a QCD, can you take the QCD equal to the RMD for both accounts to satisfy RMD requirements for both accounts? I realize QCDs cannot exceed $100K, but if your RMD is $10K is an $11K QCD ok?
Thx Pete

  • No, that will not work for the year of the IRA rollover, but could help in following years. If the current year is an RMD for both plans, the 403b RMD must be completed before any funds can be rolled to an IRA. That 403b RMD taxable income cannot be offset by a QCD. While the IRA RMD can be satisfied by a QCD from the IRA, there was already enough money in the IRA to do that without a rollover.
  • However, if the 403b RMD is distributed, then the entire balance of the 403b is rolled over to the IRA, in the following year there will be no 403b RMD, but the IRA RMD will be larger as the IRA held the entire balance at the end of the current year. Therefore, in the following year, an IRA QCD could offset all taxable RMD income (up to 100k). 
  • Another possibility is that there is no IRA balance in the current year and therefore no IRA RMD, but the person still wants to do a QCD because they cannot itemize. If 403b money is rolled over (after taking the 403b RMD) to an IRA, a QCD can be done from the IRA that is entirely pre tax. While it will not offset the 403b RMD tax, it still will reduce taxes over time since the QCD is made from pre tax IRA dollars instead of after tax non IRA dollars. The IRA balance is reduced and that reduces future IRA RMDs.  The person retains their after tax dollars that otherwise would have been donated with no deduction. If the IRA QCD is 6k, at the end of the year their IRA balance is 6k less, but their taxable balance is 6k more than it would have been. This is equivalent to a tax free IRA distribution. Therefore a QCD can still save money even in years where RMD income (403b) cannot be offset.
 

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