Tax-Free Charitable Transfers From IRAs Extended Through 2009! – January 2009

You may have heard by now from your favorite charitable organizations that Congress extruded the allowance for taxpayers to transfer directly from their individual retirement account (IRA) to a qualified charity up to $100,000 each year in 2008 and 2009 free of federal tax.

What is the advantage of this law?

Recall that when you withdraw money from your IRA – you annual minimum required distribution of an additional amount – you must include those amounts in your income. If you make a charitable contribution by making a transfer directly from your IRA to the charitable organization, the amount transferred will count toward your required minimum distribution, but it will not be included in your taxable income, thereby saving you income tax.

And what are the restrictions?

• This benefit is only available to taxpayers who are 70 ½ or older.
• The maximum amount that can be transferred directly from your IRA to the
• charitable organizations and excluded from your taxable income is $100,000 in 2008 and $100,00 in 2009.
• The amount must go directly from your IRA to the charitable organization.
• The charitable organization must be a 501©(3) public charity.
• You cannot receive any gift from the charitable organization in exchange for your donation.
• Because the amount you distributed directly from your IRA to your chosen charitable organization will not be included in your income, you will not be permitted to take an income tax deduction form the amount you transfer directly from your IRA to charity.

You should obtain a receipt from the charitable organization for your donation or your income tax records.