Passage of SECURE 2.0 Act incentivizes Americans to make charitable gifts in 2023
On Dec. 23, Congress passed the Consolidated Appropriations Act of 2023, which includes a package of retirement reform bills including the long-awaited SECURE 2.0 Act.
SECURE 2.0 provides something for every American seeking greater security in providing for retirement. Some of the changes include increasing the age for required minimum distributions and boosting catch-up contribution limits.
For charitably inclined Americans, SECURE 2.0 encourages taxpayers to use their IRAs to support their favorite charity. Taxpayers over age 70 ½ are permitted to make qualified charitable distributions (“QCDs”) of up to $100,000 from their IRA each year and avoid recognizing income on the distribution. SECURE 2.0 enhances QCDs by providing:
- For tax years beginning in 2023, a one-time opportunity to make a gift of up to $50,000 from an IRA to a charitable gift annuity or charitable remainder trust, provided the income interest is held by the taxpayer or the taxpayer’s spouse, or both.
- An increase in the current $100,000 limit on QCDs beginning in 2024 by applying inflation indexing to the QCD limit.
A few important reminders about QCDs:
- The age for making QCDs remains at 70 ½.
- Amounts distributed as a QCD can count toward satisfying the taxpayer’s required minimum distribution (“RMD”) for taxpayers over age 73, the required beginning date for RMDs in 2023.
- Taxpayers do not receive a tax deduction for a QCD. Instead, the QCD reduces the taxpayer’s income and therefore is available to itemizers and non-itemizers.
- A QCD can support many types of qualifying funds at the Community Foundation for Southeast Michigan, but donor-advised funds are excluded under the law.
- Charitable gift annuities can be established at the Community Foundation through a gift of a QCD.
As the new year approaches, consider reducing your taxable income, supporting your favorite cause, and improving your community by making a qualified charitable distribution from your IRA to an eligible charity like the Community Foundation for Southeast Michigan.
If you have questions about charitable giving through QCDs, please contact the Community Foundation’s Philanthropic Services staff at 313-961-6675.
This material was developed by Community Foundation for Southeast Michigan. It is published with the understanding that neither the publisher nor the author is engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a professional advisor should be sought.