The SECURE act signed into law on December 20, 2019, raised the age for Required Minimum Distributions (RMDs) from 70.5 to 72 for Individual Retirement Accounts owners (IRAs) who were born on or after July 1, 1949. In addition, the CARES Act is waiving the RMDs for 2020. If you already withdrew from your IRA, you have up to 60 days to transfer back into your IRA of taking the withdrawal. If you exceed the 60 days of taking the withdrawal, the rollover does not qualify for the 60 day rollover period. In addition, beneficiaries of inherited IRAs, may not return the funds.
One possible 2020 tax strategy is to convert the 2020 amount that would have been RMDs to a Roth IRA. You will be able to move funds to a tax-exempt account while maintaining your anticipated taxable income. This strategy could potentially also lower your future years’ taxable RMDs. Another tax strategy is to donate your traditional IRA RMDs directly to charity as long as the contributions total $100,000 or less and the charity is qualified by the IRS. Starting in 2020, up to $300 charitable deduction will lower your adjusted gross income (AGI), In other words, if your total income is $100,000 then your AGi is $99,700. For 2020 only, the 60% AGI limit on cash contributions is disregarded.
If you would like to learn more about this tax strategy, please call Susan at 630.523.5762.