Donors 70.5 and older have enjoyed making tax-free qualified charitable distributions (QCDs) from their IRA that also count toward their yearly required minimum distribution (RMD). Legislation passed at the end of last year, known as SECURE Act 2.0, allows donors to fund a charitable gift annuity (CGA) through a QCD.
An individual can now make a QCD of up to $50,000 (out of the $100,000 overall annual limit on IRA qualified charitable distributions) into a CGA in one calendar year. A husband and wife can each distribute up to $50,000 from their IRAs in one year for a CGA (maximum $100,000). A CGA provides the donor and/or his/her spouse with fixed quarterly payments for life. Then, after the donor goes to heaven, the remainder of the gift goes to ministries chosen by the donor.
The QCD into a CGA counts toward the RMD for those required to take it (as of 2023 the age at which RMDs must begin has been raised to 73). Since it can only be done in one tax year, it may make sense to consider distributing the maximum $50,000 amount when you decide to do it. The distribution can be split between multiple CGAs in one year as long as the total doesn’t exceed the $50,000 limit. Because the QCD is a tax-free distribution from your IRA, there is no tax deduction for the gift and the CGA payments are fully taxable.
You might want to consider this new giving opportunity if:
- you do not itemize on your taxes.
- you want to provide an income stream to you and/or your spouse.