Reply To: QCD and estate tax deduction

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#4963
wanttoknow
Participant

Thanks, Alan.

Now I understand how to use the formula in Example 2. However, that is radically inconsistent with how my estate tax deduction has been calculated over the past 15 years; and without the 4.4% QCD results in an estate tax deduction for this year more than four times the deduction according to the usual method, and 52% more than the remaining estate tax deduction.

Example 2 method:
$227,885 2019 distribution
divided by $875,849 original IRD
times $381,060 original estate tax deduction
= $99,147 2019 estate tax deduction.

Usual method: $23,228 2019 estate tax deduction.

The formula I have used for the past 15 years divides the “unused” estate tax balance by the original divisor from Table I (17.8) minus 1 for each successive year. This means each year’s estate tax deduction has been the same.

Any growth in the IRA has no effect on the annual estate tax deduction. In this respect my method is similar to the FIFO method described by Kitces.