What you need to know about the SECURE Act and CARES Act
What to Know: SECURE Act and CARES Act
Two legislative changes have taken effect that could impact your 2020 taxes and the way you can support Dean College. With this legislation in place, now is the time to review your financial plans and ensure you are set up to reach your philanthropic goals.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted Jan. 1, 2020. With it came many questions for those who are planning for retirement, retired or who are retiring in the near future.
Passed as part of a spending bill, the SECURE Act brought with it the most significant changes to retirement plans since 2006. While some changes impact you, others will impact the people you name as a beneficiary.
Changes to Know
You can contribute to your IRA longer. Previously, you could not contribute to your IRA after reaching the age of 70½. However, more and more people are working past that age. The SECURE Act repeals this age limitation, allowing you more time to save.
The required minimum distribution (RMD) age changed. The SECURE Act changed the age at which you must start taking RMDs from your retirement account from 70½ to 72 for those who were born July 1, 1949, or later. This change allows you additional time to grow the funds in your account before you must start withdrawing from it. (Note: The RMD requirement has been waived for 2020, per the CARES Act signed into law on March 27, 2020.)
Beneficiary rules have changed. Prior to the SECURE Act, beneficiaries could take distributions throughout their lives. This offered tax savings for the beneficiary. The SECURE Act preserved this option for beneficiaries who are spouses but repeals it for most non-spousal beneficiaries. They will now have 10 years to withdraw the entire amount.
What Stayed the Same
If you’re 70½ or older, you can still make a tax-free gift to a qualified charitable organization. You can transfer any amount up to $100,000 per year directly to a qualified charitable organization without paying income tax on the distribution. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions. Your gift will also be put to use today, allowing you to see the difference you’re making. Please contact JJ Alberts at email@example.com to learn more.
Review Your Plans
If you have questions about the impact of the SECURE Act on your retirement plans, be sure to make an appointment with your financial advisor. They can review the plans you have in place (including your beneficiary designations) and help make sure you are still on the right track.
The new CARES (Coronavirus Aid, Relief, and Economic Security) Act is designed to help you, businesses and nonprofits facing economic hardship during the coronavirus pandemic.
Here are a few key provisions of the CARES Act that may affect you and your charitable goals:
Required Minimum Distributions Suspended
The new law temporarily suspends the requirements for required minimum distributions (RMD) for the 2020 tax year. This probably comes as a relief to many of you who would have had to withdraw from your retirement accounts. Many of our donors use their RMD to make a gift from their IRA. Despite the RMD suspension, remember that if you are 70½ or older, you can still make a gift from your IRA or name Dean College as a beneficiary.
Why a Gift from Your IRA May Still Be a Good Idea
Your gift will be put to use today, allowing you to see the difference your donation is making.
You pay no income taxes on the gift. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions.
Since the gift doesn’t count as income, it can reduce your annual income level. This may help lower your Medicare premiums and decrease the amount of Social Security that is subject to tax.
New Tax Incentives
The CARES Act expands charitable giving incentives and allows taxpayers who take the standard deduction to make up to $300 of charitable contributions to qualified charities this year. You might think that this is a small amount and would not make a difference. But what if all of our donors gave “just” $300? Such support would have a huge impact on those we serve.
For those who do itemize their deductions, the new law allows for cash contributions to qualified charities, such as Dean College, to be deducted up to 100% of your adjusted gross income for the 2020 calendar year.
Your Charitable Goals
We are deeply grateful for your continued kindness and support. Please contact The Office of Institutional Advancement at 888-711-3326 to discuss how your gift can help further our mission.