Understanding the Pro-Rata Rule
- Qualified Charitable Distributions ("QCDs") - QCDs allow taxpayers age 70 ½ and older to transfer up to $100,000 each year to a charity tax-free. The QCD also counts towards the annual Required Minimum Distribution.
- Qualified HSA Funding Distribution ("QHFDs") - QHFDs are tax-free transfers from your IRA to your HSA. The amount transferred cannot exceed the maximum annual HSA contribution. For 2018, an individual with Family High Deductible Health Plan ("HDHP") coverage can contribute up to $6,850 (plus an additional $1,000 for taxpayers age 55 and up). Taxpayers with Self-Only HDHP coverage can contribute a maximum of $3, for the 2018 taxable year 450 (plus the $1,000 catch-up for those ages 55 and older). Finally, you are allowed only one QHFD per lifetime.
- Rollover to Company Plans - If the company plan allows incoming rollovers, you can transfer the pre-tax portion to that plan. However, the funds can only be invested in the options offered by the plan and future distributions are subject to plan rules.
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