The Consolidated Appropriations Act of 2023, passed in December 2022, includes a win for philanthropy! While this legislation will most likely be used by larger organizations and institutions, we wanted to be sure all of our partners, colleagues and friends were aware of a new giving opportunity presented by this Act.
Here’s what you need to know:*
First, what is a QCD?
This Act includes a provision that affects Qualified Charitable Deductions or QCDs, so let’s cover the basics:
- A QCD is a tax-free transfer from an Individual Retirement Account (IRA) to a qualified 501(c)(3) organization. It can satisfy the taxpayer’s required minimum distribution, all while donating to a philanthropy.
(Required Minimum Distribution: When a taxpayer reaches a certain age, the exact age being dependent on the taxpayer’s birth year, a required minimum distribution, or RMD, is an amount that must be withdrawn from their retirement account annually. Taxes must also be paid on this amount as it is considered taxable income.)
- With a QCD, a person over 70 ½ can distribute an outright gift of up to $100,000 per year from their IRA to a 501(c)(3) organization. This distribution does not qualify as a charitable deduction on their income taxes, but they are not taxed on the transferred amount. Woo hoo!
- Bottom line – in one fell swoop, a qualified taxpayer can satisfy a tax law requirement, donate to a charity, AND avoid income taxes – win, win, WIN!
How did the Act affect QCDs?
- The Act added a new type of QCD that allows individuals to distribute up to $50,000 from an IRA toward funding a gift annuity, a charitable remainder annuity trust (CRAT) or a charitable remainder unitrust (CRUT).
- These options allow donors to essentially make an (irrevocable) donation contract: the donor gives the charity a large donation, and in return, they receive a regular stream of income from the organization for the rest of their life. At the end of their life (and possibly their spouse’s life, depending on how it’s set up), the charity receives the remainder of the donation.
- The $50,000 IRA transfer for a life-income plan provision is only available for someone who is 70 ½ years and older. The transfer can be made in only one tax year, and as of now, Congress has only allowed for this provision to happen once in someone’s lifetime.
If you have any follow-up questions, we hope you will reach out to our team. We will always make ourselves available as a resource to you as you advance your mission and philanthropy. If you don’t already have a direct contact at Carter, please email email@example.com, and we’ll put you in touch with a senior-level consultant specific to your needs.
*Fundraising professionals and individuals should confer with their tax accountant or financial advisor before making any decisions. This has been written for informational purposes only and should not be relied upon as professional advice.
About the Authors
Steve Higgins, CFRE – President & CEO
Steve Higgins, CFRE, President & CEO of Carter, is one of the most respected consultants in the profession. He is well-known for his ability to help organizations embrace bold goals that lead to transformational gifts and impact. With over 25 years of combined consulting and nonprofit experience, his fundraising counsel focuses on major and mega gift strategies, leadership coaching, campaign counsel and readiness, capacity building, and organizational assessment. Steve resides in Vero Beach, Florida. Read more about Steve here.
Andrea Glickman, JD – Managing Director
Andrea Glickman, JD, Managing Director of Carter, is an accomplished and strategic consultant with a commitment to community and capacity building through philanthropic efforts, combined with a legal, finance and accounting background. With over 17 years in the nonprofit sector, Andrea previously served as the inaugural Executive Director of the Shear Family Foundation, as well as the Executive Director of the National Council of Jewish Women, Pittsburgh Section. Andrea resides in Pittsburgh, Pennsylvania. Read more about Andrea here.
When it comes to transformational change, nonprofits are experts at knowing what they need to achieve but don’t always have the tools they need to get there. Carter makes the journey easier. Co-founded by Bob Carter and Steve Higgins in 2011, Carter gathered a select team of the nation’s most respected nonprofit professionals working to advance philanthropy worldwide in the areas of fundraising, governance and organizational planning. Each Carter consultant brings decades of executive-level development experience to serve as an extension of your team and help you maximize your organization’s potential and better serve your cause. For more information, visit www.carter.global.