In August 2006, President Bush signed The Pension Protection Act of 2006.  Given this act, holders of individual retirement accounts (IRAs) can now make a donation from their IRA directly to a qualified charity.  In addition, by making the contribution directly from the IRA to the charity, the distribution is not included in the donor’s personal income on her federal taxes.  The donor, who must be at least 70½ years-old to initiate an IRA Charitable Rollover, may include gifts up to $100,000 toward their required minimum distribution for 2007.  The IRA Charitable Rollover provision is in effect for 2007 only.

As an illustration, let’s say Chris (age 72) owns a traditional IRA with a balance of $350,000.  The entire balance consists of deductible contributions and earnings.  After calling our offices for general information on the new legislation, she discussed matters with her CPA and decided that she wanted to make an IRA charitable rollover donation to Simpson College in the amount of $20,000.  She instructs her IRA custodian to distribute $20,000 directly to Simpson College.  The entire $20,000 qualifies as a charitable distribution:

• The distribution is not included in Chris’s personal income on her federal taxes;
• The distribution is not taken into account in determining the amount of Chris’s charitable deduction for the year; and
• The distribution does count toward the amount that she has to remove from her IRA as a required minimum distribution for 2007.

There are other benefits to an IRA charitable rollover donation for the donor, as well as some limitations, so please check with this office and your tax or financial advisors before implementing this program.  Additional information, including features, advantages, benefits, and limitations, is available in our publication The IRA Charitable Rollover: A New Incentive for Charitable Giving, which may be ordered online.