IRA Gifts Under the Pension Protection Act
The tax code provision allowing the tax free transfer directly from IRAs to charities expired on December 31, 2007. It is anticipated that Congress will extend this provision shortly.
Good News from Washington
Charitable Treasure Buried in Massive
Pension Legislation
It took nearly a decade, but Congress has finally enacted legislation as part of the Pension Protection Act of 2006 (PPA 2006), which offers charitably minded individuals a golden opportunity to make gifts from their IRAs and exclude the amount of their gifts from gross income. To qualify:
- The donor must be 70 1/2 years of age or older;
- The transfers must go directly from the IRA to qualified charities;
- Gifts cannot exceed $100,000 per taxpayer per year;
- Gifts must be outright, not to donor advised funds, charitable remainder trusts, or for charitable gift annuities;
- And, remember, gifts of $100,000 may qualify for Florida’s matching gift program.
This opportunity is available only for 2006 and 2007, and no charitable income-tax deduction is allowed.
Individuals withdrawing $100,000 from their IRAs and contributing it to charity would have had to include the $100,000 in their income and would have been allowed a federal charitable income-tax deduction of up to $100,000 (subject to limits of deductibility) to offset the inclusion. Ostensibly, the net result was zero tax implication—a “wash” for all practical purposes. But for those taxpayers unable to use some or all of the charitable deduction, the new law presents a significant opportunity.
So, who benefits from the Pension Protection Act of 2006?
The new law presents a wonderful opportunity until the end of 2007 for individuals to utilize their IRAs creatively to accomplish special philanthropic objectives.
- Individuals who are required to take minimum withdrawals but don’t need additional income can satisfy up to $100,000 of the distribution requirement with a transfer to charity.
- Individuals who usually give up to 50% of their adjusted gross income (AGI)—the ceiling on the allowable charitable deduction for any year—can now give up to $100,000 more from their IRA accounts, which is not subject to this limitation or taxed as a distribution. This could enable taxpayers to avoid up to $35,000 ($100,000 x 35%) in
federal income tax on IRA distributions for this and next year.
- Individuals who do not itemize and who make a charitable gift in an amount less than the standard deduction ($10,300 for married couples, $5,150 for single filers) will benefit from a transfer directly from their IRA to charity.
Please call if you have questions or if we can assist you in any way.
Planned Giving Officers:
George Cawthon Dan Ott
Doug Medlin
Phone: (352) 392-5512
Toll-free: (866) 317-4143
Fax: (352) 392-8736
www.uff.ufl.edu
If you decide to make a gift under the Pension Protection Act, the first step will be to direct your IRA plan trustee/ administrator to make a distribution to the University of Florida Foundation. A form letter that may be used for that purpose is available online: PDF | MS Word.
You should also contact us and let us know that we will be receiving a gift. A form letter for that purpose is also online: PDF | MS Word.
