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Financial Planning > Charitable Giving > Charitable Giving Deductions

Secure 2.0 Act Supercharges the QCD as an RMD Alternative for 2023

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What You Need to Know

  • Taxpayers who have yet to take their 2023 RMD may wish to explore the qualified charitable distribution option to minimize tax liability.
  • Under Secure 2.0, taxpayers can use up to $50,000 to fund a charitable gift annuity or charitable remainder trust.
  • This may allow them to satisfy their RMD obligation while creating income for retirement.

2023 is halfway over, which means that we’re reaching a point in the year where many taxpayers are evaluating their required minimum distribution obligations. Taxpayers who have yet to take their 2023 RMD may wish to explore the qualified charitable distribution option as a way to minimize tax liability.

While QCDs have been around for years, the Setting Every Community Up for Retirement Enhancement (Secure) 2.0 Act made significant changes that could make the QCD option much more attractive to some clients. Under Secure 2.0, taxpayers can actually use the QCD to satisfy their annual RMD obligation while simultaneously creating a stream of income for retirement for years to come.

QCDs: The Basics

Under the rules governing QCDs, charitably minded clients can direct up to $100,000 in IRA funds per year to charity. The $100,000 donation is not included in the taxpayer’s income and, if conditions are satisfied, the donation counts toward the taxpayer’s annual RMD. The $100,000 cap is a per-person cap, so married taxpayers can direct up to $200,000 to charity each year so long as each spouse has their own IRA.

If a client is over age 70.5, a transfer made directly (via a trustee-to-trustee transfer) from the client’s IRA to a qualified charity — generally, 501(c)(3) organizations, but not donor-advised funds or foundations — will count toward the client’s RMD and is entirely nontaxable, thus also allowing the taxpayer to reduce their taxable income for the year. Beneficiaries of inherited IRAs over age 70.5 are also permitted to make QCDs, so long as the beneficiary also meets all other basic requirements for the transaction.

QCDs can only be made from a traditional IRA or an inherited IRA. Tax-preferred accounts such as 401(k)s, SIMPLE IRAs, SEP IRAs and Roth IRAs generally do not qualify, although QCDs can be made from SEP IRAs and SIMPLE IRAs that are not ongoing. To be ongoing, an employer must have made a contribution to the SEP or SIMPLE IRA for the plan year when the contribution would be made.

While the current required beginning date for RMDs is age 73, taxpayers remain eligible to execute a QCD starting at age 70.5. High-net-worth taxpayers who don’t anticipate a need for their IRA funds and have yet to reach their RBD may consider executing a QCD earlier to reduce their overall IRA balance — and thus reduce their future RMD obligations.

Secure 2.0 Act Changes the Game for QCDs in 2023

First, the Secure 2.0 Act provides that the $100,000 limit on QCDs will be indexed for inflation in future tax years. That means taxpayers will be able to increase the amount of their charitable gifts and reduce their taxable income by a larger amount each year.

Under the Secure 2.0 Act, taxpayers are now allowed to make a one-time qualified charitable distribution of up to $50,000 from an IRA to a charitable remainder trust or charitable gift annuity. As with the traditional QCD option, the distribution will count toward the taxpayer’s annual RMD obligation without generating any tax liability.

The difference is the vehicle used to donate the funds to a qualified charity (which is a charity that is tax-qualified for purposes of the federal income tax deduction for charitable gifts under IRC Section 170). CRTs and CGAs are split-interest vehicles that allow someone to donate to charity while also creating an income stream for themselves or a beneficiary.

Taxpayers are limited to one $50,000 QCD to a CRT or CGA per lifetime. However, the taxpayer’s spouse is entitled to execute their own $50,000 QCD to the CRT or CGA. The $50,000 amount must be transferred to the vehicle in a lump sum (it cannot be split up over multiple years). No additional assets can be transferred to the CRT or CGA.

The income payments of 5% or greater from the CRT or CGA to the donor (or spouse) must begin within one year of the date the vehicle is funded — and those payments are taxed as ordinary income when received. Only the donor and the donor’s spouse (or both) can receive the income from the split-interest vehicle.

Often, the payment amounts are determined based on rates provided by the American Council on Gift Annuities. These payments can continue for a predetermined period of time or for a person’s lifetime and, after the payments cease, the remainder passes to the qualified charity.

Because CRTs can be more expensive to administer, it is likely that this provision will increase the value of the CGA option going forward.


As is the case with any financial transaction, it’s important for clients to speak with a qualified tax professional before executing a QCD. With proper planning, the strategy can provide attractive tax savings for the right clients.

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