November 23, 2008
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TCHS
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| News: New legislation makes it easier to donate money to charity from IRAs. |
A provision in the pension reform legislation President Bush signed will make it easier for older people to donate money in their individual retirement accounts to charity. The provision, which is effective only for 2006 and 2007, allows individuals who are 70 1/2 years of age or older to take tax-free withdrawals from their IRAs as long as that money goes directly to charity. Under the new provision, though, an IRA withdrawal that’s donated directly to charity is excluded from your income. You can’t claim the deduction. But you don’t have to worry about unintended consequences, either. And there’s another benefit: The withdrawal counts against your required minimum distributions for the year. IRA owners who are 70 1/2 or older are required to withdraw a minimum amount every year and pay taxes on the money, even if they don’t need it. By donating the money to charity, you can meet that requirement without incurring a tax bill. In the past, the IRS didn’t require a receipt for cash contributions of less than $250. Starting next year, though, you’ll need to be able to substantiate all cash contributions with a receipt from the charity or a bank record, such as a canceled check, in case you’re audited. There are also new standards for donations of used clothing and household goods. Under the new law, you can’t deduct donations of these items unless they’re in good condition or better. Click here to return to the news article list. |
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