Skip to main content
 

Bernhardt Wealth Management logo

  • Home
  • About 
    • Our Team
    • How We Work
    • The Bernhardt Way
    • Affiliations
  • Our Services 
    • Wealth Management
    • Investment Management
    • Small Business
  • Resources 
    • Articles
    • News
    • News Releases
    • Videos & Podcasts
    • White Papers
    • Newsletter Signup
    • Profiles in Success
  • Client Login 
    • TD Ameritrade
    • BWM Client Portal
  • Blog
  • Contact

    You are here

  1. Home
  2. Blogs
  3. The CARES Act: Required Minimum Distributions and Charitable Giving

The CARES Act: Required Minimum Distributions and Charitable Giving

Submitted by Bernhardt Wealth Management on April 13th, 2020
  • Share on Facebook
  • Tweet Widget
  • Linkedin Share Button

The recently passed Coronavirus Aid, Recovery, and Economic Security (CARES) Act provides some important—though temporary—advantages for retired persons and also those who may still want to support a favorite charity or nonprofit organization. Perhaps the most important thing for retirees to know is that the IRS has waived required minimum distributions (RMDs) for 2020. In a moment, we’ll take a look at why this matters so much right now. But there are several other important points for retirees to keep in mind as you think about how the CARES Act affects your planning for this year. 

1. No required minimum distributions (RMDs) for 2020. As mentioned, one provision of the CARES Act stipulates that those who are normally required to take RMDs from retirement accounts may choose to skip this year. This will be very helpful for many retirees, as the following example shows. As you probably know, RMDs are calculated based on account balances at year-end, and 2019 was a pretty good year in the markets. So, suppose that an individual’s RMD for 2020 came out to just over $108,000, based on her account value on December 31. As we all know, the markets dropped sharply in February and March, reducing the account balance. If that same retiree’s RMD had been calculated in mid-March, it would be only about $94,000. That means that if this individual decided to suspend the RMD for this year, it could save her almost $15,000 in taxable income. Not only that, but she’ll get the tax-free compounding effect on that money in the account for another year, instead of having to pay taxes on it. And by the way, this also applies to those who have inherited IRAs and other retirement accounts; they can skip their RMDs this year, too.

Of course, if you need to take your RMD as usual in order to have sufficient income, you certainly may. AARP recently released a very helpful article that explains several of the advantages of skipping your RMD in 2020.

2. If you’ve already taken some or all of your RMD, you can’t send it back. Unfortunately, for those who may have already begun taking a required distribution from a retirement account, you can’t reverse it. If you haven’t taken the full amount for the year yet, though, you may want to consider not taking any additional payments for 2020. Because of the CARES Act, you may also be able to roll over your 2020 RMD into an IRA under certain conditions, but you should consult with your tax advisor before you attempt this.

3. No penalties for early withdrawals from IRAs or other retirement accounts. For 2020 only, the usual 10% penalty for withdrawing money from a tax-favored plan prior to age 59 ½ is waived. Of course, those who make such withdrawals will still owe taxes on the amount withdrawn, but for some in this category who are experiencing choppy financial waters during the current crisis, this flexibility granted by the CARES Act could be a lifeline.

4. Incentives in 2020 for charitable contributions. For the 2020 tax year only, donors may apply a special limit for gifts to public charities of 100% of adjusted gross income (AGI). For those who qualify and also wish to provide significant support to a special charitable cause, this provision can offer significant tax savings. Additionally, qualified charitable donations (QCDs) are still available, allowing you to direct up to $100,000 from your IRA to the charitable cause of your choice, even if you don’t itemize. The IRS defines QCDs as follows: “A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax-deductible contributions. You must be at least age 70½ when the distribution was made…” (See IRS Publication 590-B). The QCD is not recognized as income, so you don’t pay taxes on it, but if you do take an RMD, the amount of the QCD is counted toward meeting your RMD requirements. Finally, the CARES Act makes available in 2020 a special $300 “above-the-line” deduction for charitable contributions. Whether you itemize or not, this deduction allows you to make a charitable donation that simultaneously reduces your AGI. Be sure to consult with your tax advisor if you intend to utilize any of these gifting provisions in 2020.

If you have questions about any of these matters including a discussion of possible IRA conversions to a Roth IRA, we are eager to assist you. Especially during these uncertain times, it’s important to have professional, well-informed advice. If we can help, please get in touch.

Buen Camino!

Recent Blog Posts

  • Tax Bill Takes a Back Seat, for Now
  • Buy Experiences, Not Stuff. Here’s Why.
  • Passing the SALT: Creative Workarounds on the Horizon?

Archived Blog

  • March 2021 (2)
  • February 2021 (5)
  • January 2021 (5)
  • December 2020 (7)
  • November 2020 (6)
  • October 2020 (5)
  • September 2020 (5)
  • August 2020 (6)
  • July 2020 (6)
  • June 2020 (7)
  • May 2020 (6)
  • April 2020 (6)
  •  
  • 1 of 11
  • ››

Categories

  • 401(k) (21)
  • 401(k) Retirement Planning (2)
  • Annuities (4)
  • Behavioral Finance (27)
  • Benefits (2)
  • Business (6)
  • Client Survey (1)
  • College planning (11)
  • Conflicts of Interest (4)
  • Cryptocurrency (1)
  • Cyber Security (2)
  • Debt (3)
  • Dimensional Fund Advisors (9)
  • Diversification (5)
  • Economics (34)
  • Economy (1)
  • Estate Planning (19)
  • Exit Planning (2)
  • Fiduciary (32)
  • Financial Advisor (16)
  • Financial Check-up (3)
  • Financial literacy (6)
  • Financial Planning (25)
  • Fraud (6)
  • Gordon's Life (9)
  • Health (1)
  • Healthcare (7)
  • Holidays (3)
  • Identity Theft (5)
  • Investing (97)
  • Investment Scams (1)
  • Investments (5)
  • IPO (1)
  • IRA (8)
  • Jobs (4)
  • Legacy (1)
  • Long Term Care (8)
  • Market Volatility (1)
  • Medicare (5)
  • Mutual Funds (2)
  • Philanthropic Planning (1)
  • Philanthropy (13)
  • Quality of Life (4)
  • Real Estate (7)
  • Rebalance (3)
  • Retirement (2)
  • Retirement Planning (44)
  • Saving (5)
  • Senior Issues (10)
  • Six Cs (6)
  • Social Security (8)
  • Success (10)
  • Taxes (30)
  • The Bernhardt Way (27)
  • Wealth Management (1)
  • Wealth Protection (3)
  • Wealth Transfer (1)

Refer Us

Subscribe to our Newsletter

Contact Us

Don't hesitate to get in touch with us.
We would love the opportunity to become your trusted advisor.

Phone: (703) 356-4380
Toll Free: (888) 356-4380
Fax: (703) 356-4383

Email: gordon@BernhardtWealth.com

7601 Lewinsville Road, Suite 210, McLean, VA 22102

       

Get Directions

  • Sitemap
  • Legal, privacy, copyright and trademark information

Bernhardt Wealth Management, Inc. (BWM) is a registered investment advisor with the Securities & Exchange Commission. BWM may only transact business or render personalized investment advice in those states and international jurisdictions where we are registered/filed notice or otherwise excluded or exempted from registration requirements. The purpose of this web site is only for information distribution regarding BWM products and services as well as general investor education. All information is provided for informational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.

 

Form ADV   |  Form CRS

© 2021 Bernhardt Wealth Management, Inc.. All rights reserved.

Website Design For Financial Services Professionals