2023 brings new charitable giving tax laws

Late last year, President Biden signed a $1.65 trillion-dollar omnibus spending bill known as the Consolidated Appropriations Act of 2023 (CAA). A component of this legislation, known as “SECURE 2.0,” includes many provisions that make it easier for people to build retirement savings, and includes three provisions that are particularly interesting for charitably inclined individuals.

You may be familiar with a charitable gift planning tool called the Qualified Charitable Distribution (QCD). Many individuals who are 70½ or older have already been taking advantage of the QCD. This technique allows a taxpayer to make an annual transfer of up to $100,000 from an IRA to a qualifying public charity.

At NCCF, you may use this strategy to support any non-donor advised fund such as a designated fund, field-of-interest fund or scholarship. You may also use the QCD to support one of NCCF’s local community grantmaking funds advised by one of our affiliate community foundations. By making a QCD, the taxpayer does not pay income tax on the distribution and, for taxpayers who must take required minimum distribution (RMD) from their retirement plans, the QCD counts toward that year’s RMD.

Here’s what’s new, thanks to SECURE 2.0:

More time to accumulate retirement assets

Under the new law, the RMD age (currently 72) increased to 73 starting on Jan. 1, 2023. RMDs are the IRS-mandated distributions from qualified retirement plans. The RMD age will further increase to 75 beginning on Jan. 1, 2033. This provision is a boost to retirees’ financial plans and may mean more dollars available for charitable giving, especially in the form of a tax-savvy beneficiary designation of retirement plans to charity.

Note that the age for QCD eligibility is still 70½, and donor-advised funds are not eligible recipients of a QCD.

“Legacy IRA” opportunity

SECURE 2.0 makes QCDs even more attractive because taxpayers may now make a one-time $50,000 QCD transfer to a charitable remainder trust (CRT) or other split-interest gifts.

Bigger QCDs

The annual per-taxpayer $100,000 QCD cap is now slated to be indexed for inflation, which will allow taxpayers to give even more from their IRAs directly to charity.

Interested in learning more about any of these strategies? Our development team would be happy to talk with you about how the new laws can enhance your charitable giving plans.

This is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.