IRA Gifting Ages Explained: 70 ½ vs. 73
Tech Tuesday
Other donors like me, make gifts like this.
We’ve been hearing some confusion from a lot of clients around the age split of 70 ½ vs. 73 for gifting from an IRA. Which is the correct age? What are the rules around each age?
When it comes to marketing this great gifting strategy, the problem is both are right.
Historically, the age at which you needed to start taking Required Minimum Distributions (RMD) and the ability to make a gift from your IRA were the same – 70 ½. As of this past year, the rules have changed somewhat.
The New RMD Age: 73
Directly from the IRS: “You generally have to start taking withdrawals from your IRA… when you reach age 72 (73 if you reach age 72 after Dec. 31, 2022).” If you turned 72 before 12/31/2022, you needed to have already started taking your RMD. If you’re younger than that, you don’t start taking your RMD until you’re 73.
The QCD Age Remains: 70 ½
BUT, according to the IRS: “Each year, an IRA owner age 70 ½ or over can exclude from gross income up to $100,000 of these Qualified Charitable Distributions (QCDs)…” The downside, when making a QCD, is that there is no charitable deduction for the gift. If a donor wants a tax deduction, they need to show the IRA distribution as income.
The Short of It: How It Works Together
A donor can make gifts up to $100k/$200k per year starting at 70 ½, but they don’t get the double benefit of counting against their RMD until they’re 73. For many donors, this is still a great option as they can still use their IRA like any other (appreciated) asset and make gifts strategically.