I had a $59,000 basis in an IRA due to nondeductible contributions. I used my MRD to make a QCD. Turbotax reduced my basis by the entire amount.Why???

[rich1]

I had a sizable taxable portion of the IRA. The Pre-tax and After-Tax Ordering Rules for QCDs take the amt out of the taxable first.  Why does Turbotax reduce my tax basis?

[dmertz]

After clicking the Continue button on the Your 1099-R entries page, did you enter a year-end value that is more than your basis in nondeductible traditional IRA contributions?  If you made no traditional IRA distributions other than the amount that you reported as QCD, TurboTax will fail to ask for your year-end balance.  You'll need to first enter a QCD amount of less than the full distribution amount, answer TurboTax's questions regarding basis and year-end balance, then edit the Form 1099-R to correct your reported QCD amount.

QCDs can be no more than the amount that would otherwise be taxable if all of the money was distributed from your traditional IRAs during the year.  If the amount sent to charity dips into your basis, the portion that is basis must not be reported as a QCD but instead must be reported as a Schedule A deduction.  Unfortunately, TurboTax does not do this calculation for you.  You'll have to determine the maximum QCD amount yourself, enter that amount as QCD and enter the remaining amount transferred to charity as a Schedule A deduction.

[rich1]

Excellent response.My entire distribution was QCD; so Turbo-tax did not ask me the value of the IRA.

[dmertz · Accepted solution]

After using the workaround to enter the year-end value as described in the comments above, TurboTax should show the correct amount of basis to carry forward.

[dmertz]

Note that this has been a problem with TurboTax for several years, so it's good that you were observant enough to catch it.  Despite this problem having been reported in the past, there has been no action by the developers make TurboTax ask for the year-end balance in the absence of needing to prepare Form 8606 Part I.

[rich1]

Once I got the value of the IRA entered, the proper basis showed on the Form 8606.