Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Monday, March 22, 2021

A tax break for retirees is back. Here’s how to use it — and what to avoid

TaxA tax break that disappeared last year has resurfaced in full force this year. This tax break benefits retirees in their 70s and up. These tax breaks are qualified charitable distributions, "which allow individual retirement account holders to divert some of their federally taxable required distributions to charity." The deductions allow IRA holders to make donations and reduce their federally taxable income. 

Qualified charitable deductions rose to fame in 2018 when Donald Trump's 2017 tax law was enforced. 

Now, they may be even more helpful than ever since they have been revived following their disappearance due to the pandemic. More specifically, the Cares Act effectively cancelled required minimum distributions (RMDs). 

Even though you could still use QCDs, their effectiveness was almost completely eliminated due to the cancellation of RMD requirements in 2020. 

Now, retirees can take advantage of these contributions. However, if considering QCDs, you should be careful not to "trip over yourself." You should consult with your estate planning attorney and/or financial advisor to discuss the best way to take advantage of these contributions, or possibly to stay away from them. 

See Allan Sloan, A tax break for retirees is back. Here’s how to use it — and what to avoid., Washington Post, March 18, 2021. 

Special thanks to Naomi Cahn (Justice Anthony M. Kennedy Distinguished Professor of Law; Nancy L. Buc ’69 Research Professor in Democracy and Equity; Director, Family Law Center --  University of Virginia School of Law) for bringing this article to my attention.


Estate Administration, Estate Planning - Generally, Income Tax | Permalink


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