QCD and Deductible IRA in same tax tear

[rtsietsema]

I have client who reached age 70 1/2 in 2023 and made $9,500 in QCD in 2023. They are still earning some income and would like to make a deductible IRA contribution for 2023. Is that allowed, or are there some limitations to doing so? For the record, the spouse is only 67 and his IRA balance is around $160,000.

Thanks for the responses.

[rbynaker]

I haven't run into one of these yet. The rules are designed to discourage this pretty heavily. I think the QCD will get reduced by the IRA contribution (which leaves me thinking, what's the point?)

See IRS Pub 590-B. Looks like 2022 is still the "current" version:

https://www.irs.gov/pub/irs-pdf/p590b.pdf

Or if you prefer the 2023 draft:

https://www.irs.gov/pub/irs-dft/p590b--dft.pdf

There's an example that starts on page 15 (of each).

Rick

[RWG1950]

I think the way it works is that an IRA contribution made after age 70 1/2 by this person for 2023, if earned income allows, would reduce the tax-free portion
of the 2023 QCD to the extent of the amount of the IRA contributions made after age 70 1/2. Since such an IRA contribution would negate a like amount
of QCD, an IRA contribution for 2023 doesn't seem to make sense.
This is explained pretty well in a TTB 4-20 example. "The QCD is reduced by the aggregate amount of deductible IRA contributions made after a taxpayer reaches age 70 1/2"

[rtsietsema]

Thanks for response and citation. However, does that exclude the spouse from taking a full allowable amount and use $0 for the older spouse? Or is that strategy a bit pointless as well? The taxpayers have had using QCD for a large portion of their IRA’s over the next years. Actually a decent use of tax avoidance since Schedule A is pretty much off the table.

[RWG1950]

Your particular question doesn't seem to be addressed in TTB but my thoughts are :
IRA's are social security # specific, while QCD's are account # specific.
Can't see why the younger spouse (age 67) would not be able to contribute (if income eligible or using spousal)
since he or she is not the one that made the QCD. Still, a MFJ return (in this instance) would show both an IRA
contribution and a QCD reduction on the same return. So IRS would know at least one of the spouses is 70 1/2.
Might be better for these people to avoid the issue and make their 2023 contribution(s) to Roth IRA's.
Maybe a preparer at a higher pay grade will provide a correction.