What University Contributors Should Know about the SECURE and CARES Acts
Two federal tax laws that went into effect in 2020 contain important changes for charitable giving and retirement planning. The highlights include:
CARES Act (Coronavirus Aid, Relief, and Economic Security Act)
- No IRA RMD (Required Minimum Distribution) - Individuals will not be required to take RMDs from their retirement accounts for the 2020 tax year.
- Temporary repeal of the Adjusted Gross Income (AGI) limit for gifts of cash in 2020 and 2021. If you itemize, you are eligible to receive a federal income tax deduction for "qualified" cash gifts up to 100% of your Adjusted Gross Income (AGI). This was previously limited to 60% of AGI. For gifts using appreciated securities, the AGI limitation remains at 30%.
- New charitable contribution deduction for non-itemizers—If you take the standard deduction in 2020, you can claim a charitable deduction of up to $300 for charitable contributions you make. In 2021, joint filers may deduct up to $600.
SECURE Act (Setting Every Community Up for Retirement Enhancement Act)
Passed December 2019
- RMDs (Required Minimum Distributions) beginning at age 72.
If you were not yet 70½ by the end of 2019, the SECURE Act increased the age at which you need to start taking RMDs from your retirement accounts to age 72. If you had already turned 70½ in 2019, you must continue to take RMDs as usual (with the exception for 2020, which was created by the CARES ACT-please see above).
If you are age 70½ or older, you may still make gifts to UNC Charlotte through a qualified charitable distribution (QCD), a.k.a. an IRA charitable rollover, even if you are not yet required to take a RMD. Learn more about the benefits of an IRA charitable rollover.
- Contributions from earned income to traditional IRAs past age 70½. If you are still earning wages, you can keep making contributions to your IRA. The previous age cutoff for contributions was 70½. Please note that if you are making contributions to your IRA and using your IRA to make QCDs, a.k.a. IRA charitable contributions, after 2020 QCDs will be reduced by the aggregate amount of post-70½ deductible IRA contributions.
- New 10-year distribution timeframe for non-spouse inherited IRAs—The SECURE Act eliminates the stretch IRA for non-spouses inheriting IRAs. Consequently, most IRA beneficiaries are required to take the full account payout within 10 years of the death of the original account holder. Previously, distributions from IRAs could be taken over a beneficiary’s lifetime, allowing a longer timeframe to pay the taxes. This significant change will affect estate planning, particularly in situations in which you’re considering naming children or other non-spouse family members as beneficiaries of a retirement account. This creates an even bigger tax incentive to use retirement accounts for gifts to UNC Charlotte, or, alternatively, to use the proceeds to create a testamentary charitable gift annuity or charitable remainder trust to benefit both your loved ones and UNC Charlotte.
If you would like to learn more about tax-smart ways to include UNC Charlotte in your charitable or estate plans, please contact the Office of Planned Giving at 704-687-0301 or [email protected].
The information on this website is not intended as legal, financial, or tax advice. Please consult an attorney, financial advisor, or tax advisor in your planning.