Has your tax situation changed? Looking for a new tax-wise strategy this year?

February 18, 2021

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As you collect your 2020 income tax information and prepare to file a return, are you:
• Realizing that your tax situation may be different from previous years?
• Interested in learning about a way to support your community in a tax-wise manner?

Tax law changes last year could impact your tax strategy as you begin filing your taxes. On January 1, 2020, the SECURE Act increased the beginning age for Required Minimum Distributions (RMDs) from Individual Retirement Accounts (IRAs) and other qualified retirement plans from 70½ to 72 for individuals that had not reached age 70½ by December 31, 2019. If you, or someone you know, reached 70½ years of age by December 31, 2019, you must withdraw a portion of your IRA each year based upon your age. This RMD is mandated and you must pay income tax on the portion you withdraw. If you fail to withdraw your RMD, you will face stiff penalties.

In March of 2020, the CARES Act waived RMDs for the 2020 calendar year for qualified IRA or retirement plans. As an example, if you reached 70 ½ in 2019, you could have taken your 2019 RMD in 2019, or you could have waited until April 1, 2020. Either way, you would have been required to take your 2020 RMD by December 31, 2020. The CARES Act waived both RMDs for 2020.

If you need to make an RMD in 2021, you can make what’s called a Qualified Charitable Distribution (QCD), also known as a Charitable IRA Rollover. These “charitable rollovers” count as part of your required minimum distribution, but aren’t taxable income to you.

While the SECURE Act changed the minimum age for RMDs, it did not change the minimum age for Qualified Charitable Distributions (QCDs). If you are age 70½ or older, you are still eligible to make QCDs.
Rather than simply take your RMD as a withdrawal this year, you can direct your IRA administrator to distribute a gift from your IRA to benefit the Jewish community. Any amount you transfer counts against your required minimum distribution (RMD), and you can direct up to $100,000 to your favorite causes this year.
So, how does it work? Making an IRA Rollover gift is easier than ever and here are the simple steps:

1. If you qualify, contact your IRA administrator. Because of the popularity of the rollover, most administrators provide forms and a procedure to help you make a rollover gift, also known as a Qualified Charitable Distribution or QCD.
2. Direct a transfer of any amount (up to $100,000) from your IRA to the Tidewater Jewish Foundation (TJF). This gift can be designated to benefit any local charitable organization.
3. You will pay no income taxes on the amount transferred. Note: Because you are not claiming the transferred amount as income, you will not receive an income tax deduction for your gift (though you may realize those deductions are harder to claim with the new thresholds).

Caution: The check from your IRA must be made out to a charity (such as TJF), not to you. Call the financial institution that holds your IRA and ask about its charitable rollover procedures. You will likely need to fill out a simple distribution form, naming TJF as the recipient and specifying the dollar amount.

Additionally, you can name TJF as the beneficiary of your IRA plan. Use this asset to endow your gift and leave other assets subject to lower taxes to your heirs. Often subject to high estate and income taxes, an IRA left to your heirs may result in fewer dollars for them. The more you can save on your tax bill, the more your heirs will inherit from you. At the same time, future Jewish generations in Tidewater will enjoy the benefits of your generosity.

For more information, contact Naomi Limor Sedek, Tidewater Jewish Foundation president and CEO, at 757-965-6102 or nsedek@ujft.org.

This information is not intended as tax, legal, or financial advice. Gift results may vary. Consult your personal financial advisor for information specific to your situation.

- Naomi Limor Sedek

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