Information on the new SECURE Act and CARES Act

Two new federal tax laws have been passed since December 2019 containing important changes for retirement planning and charitable giving. Below are key highlights for both laws that may impact your tax and estate planning.

• No RMD in 2020 – Individuals are not required to take a required minimum distribution (RMD) from their retirement accounts for the 2020 tax year.
• If you itemize, you are eligible to receive a federal income tax deduction for cash charitable contributions up to 100% of your Adjusted Gross Income (AGI). Previously this was limited to 60% of AGI. For gifts using appreciated securities, the AGI limitation remains at 30%.
• If you no longer itemize, the CARES Act allows you to make a tax-deductible charitable donation of up to $300 per tax filing. If you stopped making annual gifts in 2018 due to the inability to take the charitable deduction, this may be an incentive to start giving again.

Please consult your attorney or financial advisor to learn more about the impact of the SECURE Act and the CARES Act on your tax and retirement planning.

• A New Age for Required Minimum Distributions – If you were not yet age 70½ by the end of 2019, the SECURE Act increased the age at which you need to start taking required minimum distributions (RMDs) from your retirement accounts from age 70½ to 72. If you had already turned 70½ in 2019, you must continue to take RMDs as usual (exception for 2020 created by the CARES ACT).
• If you are age 70½ or older, you may still use qualified retirement plans to make gifts to Georgetown through a qualified charitable distribution (QCD), even if you are not yet required to take a required minimum distribution (RMD). Please note there is no RMD for 2020 (see CARES Act). Even without the RMD incentive, QCDs are a tax-smart way to make gifts to Georgetown whether you still itemize or not.
• If you are still earning income, you can keep making contributions to your IRA. Prior to the SECURE Act, the age cutoff for contributions was 70½. Please be aware that if you are making contributions to your IRA and using your IRA to make QCDs, the contribution amount is excluded from the QCD that can be used for the special RMD offset treatment (don’t worry about this for 2020).
• The SECURE Act eliminated the stretch IRA for non-spouses, which means that 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 the IRA could be taken over a beneficiary’s lifetime, allowing a longer time frame over which to pay tax. This is a significant change that will affect estate planning, particularly in situations where you are considering naming children or other family members who are not a spouse as beneficiaries of a retirement account. There may be an even bigger tax incentive to use retirement accounts for gifts to charity and leave assets with a lower tax burden to loved ones.

If you would like to learn more about tax-smart ways to include Georgetown in your tax or estate planning, please contact the Office of Planned Giving at 800-347-8067, by email at plannedgiving@georgetown.edu, or through our information request form.

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.