Let Your IRA Do The (Charitable) Work For You - Updated
In the days of big corporate bailouts and questionable economic stimulus payments, Congress occasionally gets it right. As a part of the Wall Street bailout project, Congress recently chose to extend the ability for individuals over the age of 70 ½ to make contributions directly from their IRAs to charitable organizations through 2009. Originally enacted in 2006, the charitable rollover portion of the Pension Protection Act of 2006 proved to be extremely popular. According to the National Planned Giving Council, in the final four months of 2006 alone, over $30 million in charitable gifts were made to charities with an average gift of $5,000.00.
In order to take advantage of the charitable rollover, certain conditions apply:
- The taxpayer must be 70 ½ at the time the charity receives the gift.
- The amount of the gift cannot exceed $100,000 for each individual per year.
- The contribution must be made to a qualified public charity (including churches) and cannot be to a gift annuity, a charitable remainder trust or a donor advised fund.
- Distributions must be made directly to the charity and cannot come to the donor.
- Contributions can only come from an IRA or a Roth IRA and cannot come from a 401(k), Simple Plan, SEP, or 403(b).
- The contribution counts toward the donor’s minimum distribution requirement.
- The taxpayer does not receive a charitable deduction; however, the amount withdrawn is not considered taxable income.
This provision can be extremely helpful if you are 70 ½ or older and any of the following conditions apply:
- You are required to take a minimum distribution but do not need the additional income.
- You would like to make a gift from your IRA without having to report the income and take the offsetting charitable deduction.
- You are currently giving 50 percent of your adjusted gross income to charity.
- Your income level triggers the phase out of your charitable deduction.
- You do not itemize your taxable deductions.
If you are interested in taking advantage of this unique charitable opportunity, please speak to your tax advisor.
Timothy K. Babcock
December 2008
