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There is BIG news in tax-smart charitable giving!

Posted on January 10, 2023
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If you are one of the many alumni who support Drexel University or the College of Medicine with qualified charitable distributions (QCDs) from your Individual Retirement Account (IRA), we have exciting news for you!

  • QCDs may now be used to fund life income gifts

The SECURE ACT 2.0 – 2022 (signed into law on December 29, 2022) significantly expands the charitable impact of your QCDs! For the first time ever, IRA account holders (age 70 ½ or older) may make a one-time QCD transfer of up to $50,000 to fund an immediate payment to one- or two-life charitable gift annuity (CGA). This unique opportunity does come with a few rules:

  • Although the $50,000 distribution limit does not have to be made as a single charitable gift to a single charity, the gift must be completed in a single year and only once during the lifetime of the IRA owner
  • All income payments made to recipients from CGAs will be taxable
  • Income payments from two-life CGAs are limited to IRA account holders and their spouses, and must be non-assignable (spouses can each contribute up to $50,000 from their respective IRAs for one two-life CGA)
  • Income payments must begin no later than one year from the date of funding (which disqualifies deferred CGAs)
  • QCDs may not be combined with other assets to fund CGAs

Of course, as with all QCD gifts, the amount donated will not be included in your taxable income for the calendar year in which you fund your CGA.

  • CGA payout rates have increased

If you’re tired of being bounced around by the stock market, consider this: as of January 1, 2023, CGA payout rates increased by approximately 0.4 to 0.6 percentage points. For a $20,000 single life CGA, the annual fixed payment will be as much as $120 higher.

A CGA offers you the opportunity to make a gift to Drexel or the College of Medicine and receive guaranteed, fixed income payments in return for the rest of your life. When your CGA terminates, the remainder of your gift will be used to support whichever program or department you designate.

Sample Rate Chart for a $20,000 One-Life Immediate CGA*

New Rates as of 1/1/2023

Your Age

Your Rate

Charitable Deduction Amount

Annual Income

80

7.6%

$10,383

$1,520

75

6.6%

$9,672

$1,320

70

5.9%

$8,958

$1,180

65

5.4%

$8,320

$1,080

*assumes a 5.2% IRS discount rate

 

A CGA might be the right charitable giving choice for you if any of these situations apply:

  • The interest rate on a CD or other fixed-income investment is low and you would like to increase your cash flow
  • You own appreciated stock or mutual fund shares, have considered selling some of the shares and reinvesting the proceeds to generate more income, but don't want to pay tax on the capital gain
  • You would like fixed payments that are unaffected by interest rates and stock prices, which you cannot outlive
  • You want to assure the continuation of payments to a loved one after your death without the delay of probate proceedings and in a tax-efficient manner

Celebrate the new year by taking advantage of the recent changes in tax laws for 2023 and the new CGA payout rates! To learn more, contact David Toll, senior associate vice president for Gift Planning, at (215) 895-1882 or giftplanning@drexel.edu.

Posted in Tax Smart Giving

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