The Coronavirus Aid, Relief and Economic Security (CARES) Act enacted on March 27, 2020, included three provisions for people with IRAs including waiving the Require Minimum Distribution. Read further for a summary of the changes plus a reminder about how an IRA can benefit charitable organizations.
- IRA Contributions– The CARES Act extended the deadline for contributions for the year 2019 until July 15, 2020.
- IRA Loans – Individuals may borrow up to $100,000 from an IRA in 2020 as a result of the CARES Act. The loan is called a Coronavirus Distribution. The borrowed amount may be re-contributed to the IRA without penalty if done within three years of the withdrawal date. The penalty has also been removed for borrowers who are below age 59 ½ who meet certain criteria.
- IRA RMDs – Normally, IRA owners over age 72 must take a required minimum distribution (RMD) each year; however, for 2020, the CARES Act has waived the RMD. Congress included this provision in the CARES Act because it was unfair to require IRA owners to sell securities in a down market in order to take their RMDs. The RMD waiver also applies to inherited IRAs. The RMD will return in 2021.
IRA owners who are over age 70 1/2 can still elect to make a qualified charitable deduction (QCD) from their IRA to benefit charity, made possible by the IRA Charitable Rollover signed into permanent law in 2015.
QCD’s are capped at $100,000 annually per person and must be made directly to the qualified nonprofit organization. In any other year, the IRA owner could apply the QCD towards their RMD and deduct their RMD on their tax returns thus lowering their adjusted gross income and effectively reducing their income taxes.
With the suspension of the RMD in 2020, that deduction incentive doesn’t exist, yet a gift from an IRA can still be a great way to support charities, especially at a time when the nonprofit sector is in great need of support as it responds to the devastating impacts of the COVID-19 pandemic.
Charitable gift planning regulations change and can be confusing. The Community Foundation can help you to create a charitable gift plan that will accomplish your giving goals and make economic sense. Give us a call to discuss making an impact on your community now or through your estate.