In these unprecedented times of national and international crisis, we become aware of critical needs in our communities. We see many individuals responding to this in performing essential jobs at hospitals and in the service sectors that are essential to our daily lives: grocery stores, home deliveries of food and meals, police and fire departments, and many more. Some are volunteers, giving not only of their time, but also risking their health to assist others.
For those of you who can afford charitable gifts now, there are two notable law changes that might be considered:
- For 2020, the CARES Act has eliminated the “required minimum distribution” (RMD) rule that applies to individuals over age 70½. This rule normally requires older participants in IRAs and other retirement plans to take distributions (and pay normal income taxes) on an amount determined under the RMD rules. However, the law change for 2020 has not affected the ability of individuals over 70½ to distribute up to $100,000 out of an IRA as a tax-free “qualified charitable distribution” or “QCD.” A QCD may be made out of an IRA after the IRA owner is age 70½. It has to be distributed directly by the IRA trustee or custodian to the charity, generally a 501(c)(3) organization. If interested in such a charitable gift, contact your IRA financial institution.
- The CARES Act has created the opportunity in 2020 for individuals who do not itemize their deductions to claim an “above-the-line” deduction (not to exceed $300) for cash contributions to charities. Since most taxpayers do not itemize deductions following the Tax Cuts and Jobs Act of 2017, the “above-the-line” deduction has real value to non-itemizers, allowing them to reduce their federal income tax liabilities. It must be made to a qualified charity in cash in 2020 to be eligible for the deduction, and it cannot be made to a charity for the purpose of deposit into a donor advised fund.
If you have questions on these or other issues related to retirement plans or tax issues, contact any one of the Dinse tax and employee benefit lawyers: