CHARITABLE GIFTS BY IRAS UNDER THE EMERGENCY ECONOMIC STABILIZATION ACT OF 2008
Congress recently enacted and the President signed into law the Emergency Economic Stabilization Act of 2008. Among other things, this new legislation included the extension of provisions of the Pension Protection Act of 2006 relating to IRA distributions to qualified charities. The provisions of the 2006 law (which expired at the end of 2007) now continue to be effective for distributions made in 2008 and 2009. Qualified distributions directly from an IRA to a charity are not reportable as taxable income to the taxpayer and the taxpayer takes no charitable deduction for contribution. Set forth below are the requirements that must be met:
·The taxpayer must be at least 70 1/2 years of age at the time of the distribution/gift
·The distribution/gift must be from a traditional or Roth IRA (other retirement plans such as a 401(k) do not qualify)
·With limited exceptions, the distribution/gift must be made to a public charity that is not a supporting organization or a donor advised fund
·The distribution/gift must be made outright to the charity with no life income benefits to the taxpayer or others such as those that may be available through a charitable gift annuity or charitable remainder trust
·The distribution/gift must be paid directly from the IRA administrator to the charity
·Qualifying distributions are limited to a total of $100,000.00 per individual per year
·The exclusion from income applies only if the entire distribution would have been allowed as a charitable contribution but for the application of this law (e.g., the charitable deduction would not have been reduced or eliminated because of benefits available to the taxpayer resulting from the gift)
This provision of this law may be particularly beneficial to taxpayers who do not itemize deductions since they would not claim a charitable deduction if the IRA distributions were made directly to them and they in turn made donations to charity. Not having to include the IRA distributions as reportable income saves taxes on those distributions. Taking advantage of this law may also reduce the amount of social security benefits that are subject to tax, since the taxation of social security is contingent upon the taxpayer’s reportable income. The lawmay also benefit those who have carryover charitable contributions and those who may otherwise be subject to reductions in itemized deductions.
The foregoing information is intended as general information only and is not intended as legal or tax advice. Please contact Strong & Hanni for specific legal or tax advice on this matter.
Article provided by Paul Hess.
