Year-End Reminder: Avoid This Costly Mistake

Under the SECURE (Setting Every Community Up for Retirement Enhancement) Act, taxpayers with earned income can continue making deductible contributions to IRAs after age 70½. For 2022, the maximum amount is $6,000 plus a $1,000 catch-up amount for those age 50 or older. But a client planning to make a qualified charitable distribution (QCD) from an IRA may be in for a nasty surprise if a deduction is claimed for an IRA contribution in the same year.

Making a deductible IRA contribution reduces the amount of a QCD that passes to charity tax-free. In Notice 2020-68, the IRS provides an example in which the excludable amount of the QCD is reduced by the amount of IRA contributions after age 70½. The result: the QCD donor could end up paying tax at ordinary income rates on money given to charity from the IRA—a potentially costly gift if the donor does not itemize.

<back

© Copyright by Sharpe Group. All Rights Reserved.

Community Resources

We are your community foundation.

Get in touch with us to discuss your how together we can make Southern Indiana’s future even brighter!

Back to Top