Use Your IRA as Never Before

On August 17, 2006, President Bush signed into law new tax incentives for charitable gifts from donors who are 70 ½ or older.  The Pension Protection Act of 2006 encourages financial support of charitable organizations across the United States. 

Under the law, you can make a lifetime gift using funds from your individual retirement account (IRA) without undesirable tax effects.  Previously you would have had to report any amount taken from your IRA as taxable income, than take a charitable deduction for the gift, but only up to 50 percent of your adjusted gross income.  In effect, this caused some donors to pay more in income taxes than if they didn’t make a gift at all. 

Fortunately, now these IRA gifts can be accomplished simply and without tax complications.  Plus, you can make the gift now – while you are living and able to witness the benefits of your generosity. 

• You may contribute funds this way if:

• You are age 70 ½ or older

• The gift is $100,000 or less each year

• You make the gift on or before December 31, 2007

• You transfer funds directly from an IRA or Rollover IRA

• You transfer the gift outright to one or more public charities, but not supporting organizations or donor advised funds.

• You cannot receive benefits from us in exchange for the gift.

 

 How The New Law Works

Pat, aged 80, has $450,000 in an IRA and has pledged to give $75,000 this year.  If Pat transfers $75,000 from the IRA, she will avoid paying income tax on that amount.  She cannot, however, claim a charitable deduction – it is a pure “wash.”  Pat has found an easy way to benefit charity without tax complications. 

If she desired, Pat could give more than $100,000.  The legislation allows a maximum $100,000 gift in both the 2006 and 2007 tax years.  So Pat could give $100,000 each year.  If her spouse has an IRA and is 70 ½ or older, he can also give up to $100,000 each year.

How to Make a Gift

Prior to making a gift, contact the recipient organization to ensure that they are an eligible organization.  Once you have received this confirmation and any special instructions, contact your IRA custodian to transfer your desired amount. 

For More Information

It is wise to consult tax professionals if you are contemplating a gift under the new law.  Please feel free to call Kathleen M. Tillman at 719 544-9861 ext. 131 or email ktillman@dioceseofpueblo.com with any questions.

 

Copyright © 2007 Dusplic. Designed by Free CSS Templates | Valid XHTML
The Catholic Diocese of Pueblo Foundation, Inc.
Webmaster