Forbes: New Tax law Rewards Charitable IRA Retirees With A $50, 000 Income Tax Deferral Opportunity (December 30, 2022)

Forbes has published an article, “New Tax Law Rewards Charitable IRA Retirees With A $50, 000 Income Tax Deferral Opportunity,” which discusses three types of split-interest entities which have experienced a change in requirements when qualifying for one-time QCD elections as a result of the SECURE 2.0 Act. Additionally, they present methods to take advantage of these new benefits, and potential issues to keep an eye on. The abstract is as follows:

The SECURE 2.0 Act of 2022, which was included in the $1.7 trillion omnibus spending bill signed by President Biden on December 29, 2022,[1] has a small gift for charities and individuals over age 70 1/2 who are willing to transfer up to $50,000 to a charitable remainder trust or into a charitable annuity arrangement.

Since 2006, individuals who are required to take annual minimum distributions from their IRA accounts have had the option of transferring up to $100,000 per year directly from one or more IRAs to one or more public charities and/or private operating foundations. This transfer to a public charity is known as a “qualified charitable distribution” (QCD). The Internal Revenue Code (IRC) defines qualified charitable distribution as “any distribution from an individual retirement plan . . . which is made directly by the trustee to [a public charity or private operating foundation] and which is made on or after the date that the individual for whose benefit the plan is maintained has reached age 70 1/2.”[2] Note that this is a younger age than when IRA owners are required to begin taking required minimum distributions at age 72 (73 in 2023).

These qualified charitable distribution rules under IRC § 408(d)(8) have resulted in a great many donations to charities that would not have otherwise occurred. The most effective transfer to charity from a tax-planning standpoint is to take ordinary income subject to federal income tax and to allow that ordinary income amount to go to charity.

SECURE 2.0 indexes the $100,000 annual exclusion limit for inflation beginning in 2024 and provides a second option to take advantage of the exclusion beginning in 2023 for those taxpayers who have reached age 70 1/2 and are required to take minimum distributions.

SECURE 2.0 permits a taxpayer to make a one-time $50,000 distribution directly from an IRA or IRAs to a charitable remainder trust or a charitable annuity and make a one-time election to treat the contributions as if they were qualified charitable distributions made directly to a charitable entity.


Click here to see the full article, “New Tax Law Rewards Charitable IRA Retirees With A $50,000 Income Tax Deferral Opportunity”

Posted by Melissa Zheng, Associate Editor, Wealth Strategies Journal.

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