Tips to Prepare Tax Statements for 2022
January 10, 2023 by Gwen Colwell
As part of the Consolidated Appropriations Act for 2023, Congress and the President passed into law new provisions commonly referred to as “SECURE Act 2.0” (“the Act”) which, among other things, provides a new opportunity for charitable gift planning. As of 2023, the Act now allows donors who are at least 70-1/2 years old to make an IRA Qualified Charitable Distribution (QCD) in exchange for a charitable gift annuity (CGA) or a charitable remainder trust (CRT).
This is a limited exception to the general rule prohibiting anything of value (or “quid pro quo”) in exchange for an intended QCD. (Here is more information about the basics of QCDs).
Here are some key points about the IRA QCD life-income gift option:
Note: Because of the dollar limitation and typical costs to establish and administer a CRT, use of a QCD to fund a CRT generally is not viable as a practical matter. The law change might be an appealing option, though, for some donors wishing to establish a CGA.
In addition to the option of an IRA QCD for a life-income gift, two other provisions of interest include (1) an inflation adjustment for the $100,000 general QCD limit and the $50,000 limit for life-income gifts in exchange for a QCD described above, starting in 2024, and (2) an increase to the age for beginning RMDs. For individuals turning 72 in 2023 or later, the age for RMDs is 73 (increased from 72), and the beginning age will increase to 75 for individuals turning 74 in 2033 or later. It is important to know and remember that the minimum age for an IRA QCD has not changed, and remains 70-1/2.
The dollar restriction, no charitable deduction, all ordinary income, and the fact that the QCD life-income option can only be used in a single year for each donor make this law change of limited benefit to donors and charities. In many cases, it will be better for a donor interested in a CGA to fund it with other assets, such as cash or appreciated stock.
The QCD for a CGA option will be attractive to some donors, however, such as donors who do not have other assets to give. More importantly, these new provisions are a good reason and opportunity to start conversations with your donors. Plan to share some of this information with your station’s supporters this year.
Disclaimer: As always, while intended to be useful information, this does not constitute legal, financial, or tax advice. For legal, financial, or tax advice, please seek counsel from your own independent professional advisors.
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