How SECURE 2.0 could positively impact your charitable giving
On Dec. 29, 2022, President Biden signed a $1.65 trillion-dollar omnibus spending bill known as the Consolidated Appropriations Act of 2023.
A component of this legislation, known as "SECURE 2.0," includes many provisions that make it easier for people to build retirement savings, ranging from required enrollment in employer-sponsored 401(k) plans to larger "catch up" contributions to enable workers nearing retirement to add more to their retirement accounts each year.
Several of the new law's provisions are also particularly interesting to people who give to charities.
Here's what you need to know about SECURE 2.0:
- Under the new law, the required minimum distribution (RMD) age (previously 72) increased to 73 on Jan. 1, 2023. RMDs are the IRS-mandated distributions from qualified retirement plans such as IRAs. The RMD age will further increase to 75 beginning in 2033. This provision is a boost to retirees' financial plans and may mean more dollars available for charitable giving, especially in the form of a tax-savvy beneficiary designation of retirement plans to charity, as many people may not need the income.
- For those who may not need the income from their IRA, a Qualified Charitable Distribution (QCD) allows taxpayers to make an annual transfer of up to $100,000* from an IRA to a qualifying public charity such as a field-of-interest fund, scholarship fund, or unrestricted fund at the community foundation. The taxpayer does not pay income tax on the distribution and, for taxpayers who must take RMDs from their retirement plans, the QCD counts toward that year's RMD.
- Note that the age for QCD eligibility is still 70 ½, and donor-advised funds are still not eligible recipients of a QCD. Designated funds or scholarship funds are a great alternative!
- Beginning in 2024, the annual per-taxpayer $100,000 QCD cap will be indexed for inflation*, which will allow taxpayers to give even more from their IRAs directly to charity.
- In addition, the "Legacy IRA" provisions of SECURE 2.0 make QCDs even more attractive because taxpayers may now make a one-time $50,000* QCD transfer to a charitable gift annuity (CGA) or charitable remainder trust (CRT). Both CGAs and CRTs are life income gifts, meaning the donor receives a fixed income stream during their lifetime while benefiting their chosen charity in the future. Charitable gift annuities can be established through Akron Community Foundation, with the remaining assets supporting or creating a nonprofit endowment fund.
Contact Laura Lederer at 330-436-5611 or firstname.lastname@example.org to discuss how these new provisions can enhance your charitable giving plans.
*Beginning in 2024, the annual limit for QCDs will be indexed for inflation. The 2024 limit for Qualified Charitable Distributions is $105,000. The 2024 limit for one-time QCD transfers to a split-interest vehicle is $53,000.
This content is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.