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Granby | Hot Sulphur Springs |
Juniper @ Grand Lake |
Kremmling | |
New Law Temporarily Allows Tax-Free IRA Distributions to Charities
Effective for 2006 and 2007, if you have reached age 701/2, you may have your IRA trustee contribute up to $100,000 each year from your IRA directly to a qualified charity and exclude the distribution from your income. Since you are excluding the distribution from income, you will receive no charitable contributrion deduction. This distribution to charity will also count toward any "minimum required distribution" that you would otherwise be reqired to take during the year of the contribution. This new rule only applies to the "taxable portion" of the IRA. Furthermore, to qualify, the contribution must be made by the IRA trustee "directly" to a qualifying 50% charity.
Planning Alert!
Contributions to "private foundations," "donor-advised funds", and certain other "supporting organizations" do not qualify. In addition, this special rule does not apply to SEP or SIMPLE IRAs.
Tax Tip.
The following are some of the possible benefits of this new provision:
1) Since the IRA distribution to the charity is excluded from income, taxpayers who do not itemize deductions get the equivalent of a charitable contribution deduction by making the contribution directly from their IRA;
2) taxpayers who itemize deductions can avoid the 50% of AGI limitation for the charitable donation made from the IRA; and
3) since the contribution made from the IRA is not included in income, this has the efect of reducing AGI and thereby increasing itemized deductions that are reduced as AGI increases.
Top Photo: Vista Overlook, Top of Sol Vista Lifts
Courtesy of Patricia Berman