IRA Charitable
Contributions
New option for charitable giving
If you are age 70½ or older, there is another option for you to
consider when making charitable contributions. Beginning after December
31, 2005, you may be allowed to make a charitable contribution of up to
$100,000 for 2006 and again in 2007, of distributions from your IRA.
Although there is no charitable contribution deduction allowed, you are
not required to include the distribution in your income for the year the
donation is made. This option is limited and may not be the best option
for some taxpayers.
The charitable contribution distribution is only allowed in 2006 and
2007, with the maximum contribution limited at $100,000. The taxpayer must
be over the age of 70½ and currently taking his or her required minimum
distributions.
Only the distributions that are otherwise required to be included in
income are eligible for the charitable contribution distribution. The
distribution must be made by the IRA trustee directly to the charity. This
means that a distribution that is made to the IRA owner and then turned
over to the charity, does not qualify.
Using this option to reduce the balance in your IRA can be a valuable
estate planning tool. The value of your IRA is required to be included in
your estate at death. Until 2009, estates with a value in excess of $2
million are subject to estate tax. Contributing some of your IRA to a
charity while you are still living is an effective way to reduce your
taxable estate.
