WINDOW CLOSING TO MAKE SENIORS TO MAKE IRA CONTRIBUTION!

Excerpt from Save Seniors Taxes on Their IRA Distributions
By Elaine Floyd, CFP
October 5, 2006

Older clients can donate up to $100,000 from their IRA tax-free thanks to the Pension Protection Act of 2006. Plenty of rules apply, but for seniors needing a tax deduction or wanting to remove assets from their estate, qualifying isn’t difficult. However, the opportunity vanishes in December 2007.

A very small window has opened giving IRA holders who have reached age 70 ½ the ability to donate up to $100,000 directly to charity from their IRA without reporting the income as a taxable distribution. The window slams shut Dec. 31, 2007, which means clients have just two years to do this.

The law, which was passed as part of the Pension Protection Act of 2006, is actually retroactive to Jan. 1, 2006, so anyone who makes a qualified charitable distribution anytime during 2006 or 2007 need not report the distribution as income. Of course, no one knew what the qualifying rules were before the act passed on Aug. 17, 2006, so for all practical purposes, the window extends from the date of enactment to the last day of 2007.

The Rules.

• The client must be 70 ½ or older at the time the distribution is made.
• The exclusion applies to traditional IRAs and Roth IRAs only.
• The amount donated cannot exceed $100,000 per person, per year.
• It counts as the client’s required minimum distribution.
• The distribution must be made payable to the charity.
• Split-interest gifts do not qualify.

These seem to be a lot of rules to remember for an opportunity that exists for 2006 and 2007 only. But keep in mind that the first step is always to help the client determine if making a qualified charitable distribution from an IRA is a smart thing to do in the first place.

Keep in mind that the last day to make a charitable contribution for the tax year is Dec. 31- which falls on a Sunday this year. Clients who will be asking their IRA trustees to issue a check to charity under qualified charitable distribution rules should allow plenty of time for possible administrative snafus.

Full Article can be found on www.horsesmouth.com – the YMCA of Beaufort County does not endorse this or any other financial advisor or financial institution and we strongly recommend that you seek counsel before making major financial decisions.

If you are interested in pursuing this option, the YMCA of Beaufort County strongly encourages you to contact your personal and preferred financial advisor or family attorney to discuss.