Tax Law Changes and Charitable Giving in 2020
While federal tax law governing retirement benefits has changed significantly as of January 1, 2020, the IRA charitable rollover remains an effective charitable giving strategy.
The new law:
- Increases the age for IRA required minimum distributions from 70½ to 72.
- Repeals the age restriction on contributions to traditional IRAs. In 2020 and beyond, you can make contributions to your IRA after reaching age 70½.
- Preserves the IRA charitable rollover for individuals age 70½ or older.
You may continue to transfer up to $100,000 per year directly from the custodian of your IRA to the Community Foundation without reporting the distribution as income if you are age 70½ or older. The IRA charitable rollover has the effect of a dollar for dollar deduction for charitable contributions you make, and a dollar for dollar enhancement of endowment at the Community Foundation for present and future needs of individuals and communities in our region.
The change to the IRA contribution rules – allowing contributions to be made at any age (previously not allowed after 70½) – requires an additional calculation when you make a deductible contribution to your IRA after age 70½ and a charitable rollover from your IRA.
Under the new law, when you make an IRA charitable rollover, you must include in your gross income the amount of any post-age-70½ deductible contributions you made to your IRA. You will be eligible to have any excess amount (the amount of the IRA charitable rollover that exceeds your post-70½ deductible IRA contributions) treated as a qualified charitable contribution and hence not included in taxable income.
If you wish to support endowment at the Community Foundation with an IRA charitable rollover, please consult with your professional advisor.