Donors with IRAs? Time is running out to take advantage of the C.A.R.E.S. Act.

December 09, 2021

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As we approach the end of the year, many of your potential donors may be scrambling to ensure they have withdrawn their required minimum distributions from their individual retirement accounts. These often-unwanted distributions should be a prime target to bolster your end-of-year efforts.

You are probably familiar with the Qualified Charitable Distribution (QCD) which allows IRA owners to gift up to $100,000 tax-free from their IRA to a charity, and helps satisfy part or all of the required minimum distribution. But did you know that with the passage of the Coronavirus Aid, Relief, and Economic Security Act (C.A.R.E.S. Act), your potential donors have greater flexibility in their IRA for this year only? Ian Berger of the Slott Report introduces the concept of the “Mega QCD” which ends after 2021.

Read his article "The “Mega QCD” Offers A Way Around The Qualified Charitable Distribution Restrictions For 2021" here.

Qualified Charitable Distributions (QCD)

  • A qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA).
  • IRA owner must be age 70 ½ or over.
  • Limited to $100,000 annual limit.
  • Paid directly from the IRA to a qualified charity.
  • Can satisfy all or part of the required minimum distribution.

“Mega Qualified Charitable Distribution”

  • The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed into law on March 27, 2020
  • Congress suspended the 60% charitable deduction limit for 2021, meaning that 100% of cash donations are able to be deducted in 2021.
  • IRA owner must be age 59 ½ or over. Otherwise, could be hit with a 10% early distribution penalty.
  • Any cash gift to charity can be deducted up to AGI.
  • The “Mega QCD” is not a real term but rather the phrase used to describe this IRA strategy.

 

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