Greetings and Happy Tax Season!
Maybe not the most fun topic of the year but we wanted to take the opportunity to help you ease into the season by offering a few tips and tax updates you may want to consider.
There were several updates to the 2020 Retirement Savings Laws (SECURE Act) that we wanted to share with you. First, the age at which individuals must begin taking required minimum distributions (RMDs) increased from age 70 ½ to 72. This only applies to individuals who turn 70 ½ after December 31, 2019. The law also now allows for individuals to contribute to an IRA at any age, as long as they have earned income.
Specifically pertaining to RMDs, we wanted to take the time to share a little more information on a qualified charitable distribution (QCD). If you are charitably inclined and looking for tax benefits, a QCD is a great option to consider with your RMDs. A QCD is a direct transfer of funds from an IRA to a qualified charity that satisfy your RMD for the year and can also be excluded from your taxable income. This benefit is not the case with a regular withdrawal from an IRA, even if you use the money to make a charitable contribution later on. If this is of interest, we would love to talk with you more about this and see if it is something you would like to consider.
The other change from the SECURE Act we would like to highlight is the new distribution rule for inherited retirement accounts. The new law requires assets in an inherited IRA to be fully distributed within 10 years. Again, this bill does not affect existing inherited accounts. It only applies to accounts that are inherited after January 1, 2020.
Let us know if you have any questions about any of this or if there’s any way we might help—we’d love to hear from you. And if there is anyone you know who may benefit from this, feel free to forward to a friend or we are happy to connect with them directly.