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Disappearing Tax Opportunity
Unless congress passes an extension, "qualified charitable distributions" will expire on December 31, 2007. These involve the ability of a taxpayer to make a direct transfer from an existing Individual Retirement Account to a charitable organization. The donor of the gift must be at least 70 1/2 years of age, and own a traditional IRA or Roth IRA - other retirement plans like 401K are not eligible. Other plans can be rolled into an IRA, and then the gift can be made.
Unless congress passes an extension, "qualified charitable distributions" will expire on December 31, 2007. These involve the ability of a taxpayer to make a direct transfer from an existing Individual Retirement Account to a charitable organization. The donor of the gift must be at least 70 1/2 years of age, and own a traditional IRA or Roth IRA - other retirement plans like 401K are not eligible. Other plans can be rolled into an IRA, and then the gift can be made.
The transfer has to be made by the IRA custodian, the owner cannot withdraw funds and then transfer them to the charitable organization. Any withdrawal will be considered income to the donor. There is no charitable deduction, but the transfer counts toward the required annual distribution and therefore can reduce taxable income.
There are a number of situations that present opportunities for this type of transfer. Some retirees give thousands to charity, but receive no benefit because they do not itemize their deductions.
Clients who pay income tax on their social security payments will find their "modified adjusted gross income" reduced, likely lowering income taxes on social security payments.
For those who face income and estate taxes, the total overall can be as high as 70% or more. the qualified IRA transfer avoids both of these taxes.
The most a person can deduct for charitable gifts in any year is 50% of their adjusted gross income. Gifts made directly from an IRA are not considered under this 50% limitation. This allows for extra tax benefits for those who wish to make large 2007 gifts.
For further information on this tax saving opportunity, contact us at www.associatesgroupinc.com