2023 Brings New Giving Opportunities for IRAs

Did you know that, now more than ever, retirement investments can be a tax-savvy source to fuel your charitable giving?

That’s because new federal rules offer enhanced opportunities for a popular giving strategy involving IRAs, called Qualified Charitable Distributions.

WHAT’S A QCD?

A Qualified Charitable Distribution – or QCD – is a payment you can make directly from your IRA to support a 501(c)3 charity, such as the Community Foundation of Broward.

If you are over the age of 70½, a QCD is an above-the-line tax deduction that can also satisfy your Required Minimum Distribution (RMD). That means you can use a QCD – also known as a Charitable Rollover – to give up to $100,000 per year from your IRA to charitable organizations, without that amount counting toward your taxable income.

New federal legislation that took effect in January, known as “SECURE 2.0,” includes updates to guidelines for QCDs.

Here are three new provisions:

Taxpayers may now make a one-time $50,000 QCD transfer to a charitable remainder trust (CRT) or other split-interest gift such as a charitable gift annuity (CGA). Note that the law effectively mandates that the CGA or CRT be created solely for the purpose of receiving a QCD because the new statute requires that the vehicle contain only IRA assets.

The Required Minimum Distribution (RMD) age (formerly 72) increased to 73 on January 1, 2023. The age will increase to 75 beginning on January 1, 2033. While this provision is not directly tied to charitable giving, it could impact your overall financial plans and may affect the timing and strategy of your philanthropy.

The annual per-taxpayer $100,000 QCD cap is now slated to be indexed for inflation, which will allow you to give even more from your IRA directly to charity.

Here’s what remains the same:

Eligibility for making a QCD still starts at 70 ½. This allows taxpayers who are not yet required to take IRA distributions under the RMD rules (which is now age 73) to still take advantage of the QCD technique without the income tax hit on the distributed funds, while also removing those funds from liability for future estate taxes.

Taxpayers required to take RMDs can still count QCDs toward their RMDs, thereby avoiding the usual income tax hit on RMD dollars.

A QCD isn’t permitted to a private foundation or a Donor-Advised Fund. The Community Foundation offers several types of charitable funds that can be supported by a QCD, such as Unrestricted Endowed Funds, Field of Interest Funds, Designated Funds and Scholarship Funds.

Questions?

To make a BOLD impact with your QCD, contact Matt Kahn, Senior Director of Philanthropic Services, at 954-761-9503 or mkahn@cfbroward.org