The Budget Bill, signed into law on December 20, 2019, allows taxpayers, age 70 ½ or above, to continue to make Qualified Charitable Donations (QCDs) from their IRAs with a few caveats. Many of our church members find this is a great way to support our church and reduce their tax burden.
The Budget Bill pushes the retirement account Required Minimum Distribution (RMD) beginning age back to age 72, but still allows QCDs beginning at 70 ½. How to calculate the cap on the tax-free distribution is not yet clear, but we can assume we would continue to use the tables provided under the prior law, or $100,000, whichever is smaller. So, from age 70 ½ to age 72, a taxpayer can make a QCD based on the RMD tables even though they have no requirement to take a distribution.
Another change included in the bill, however, makes things more complicated for some people. There is no longer any age limit for making contributions to an IRA or other retirement account. A taxpayer can make contributions at any age, as long as they have “earned income,” usually wage or business income. If someone makes a contribution to a retirement account, the contribution would effectively offset the QCD, making part or all of the distribution taxable.
These changes are effective January 1, 2020. Be sure to consult your tax advisor for advice about your specific situation.
December 28, 2019