Charitable IRA Rollover Opportunity

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On Friday, October 3, 2008, Congress approved and the President signed legislation that includes the immediate and retroactive extension of the popular Pension Protection Act of 2006 provision which allows taxpayers over 70½ to make tax-free distributions from their traditional and Roth IRAs (Individual Retirement Accounts) directly to charity in 2008 and 2009.

The Pension Protection Act of 2006 allows individuals 70½ and older to make tax-exempt charitable contributions up to $100,000 directly from their IRA assets to an eligible charity. The transaction must be made by December 31, 2007, as it is not certain that this provision will be extended.

This legislation is good news for many IRA account holders 70½ and older because this qualified charitable distribution, or QCD, satisfies the minimum distribution rule. In addition, QCD monies are excluded from adjusted gross income and, therefore, are tax-exempt. Married couples may donate up to $200,000, provided each spouse owns at least one IRA and can make a $100,000 QCD.

While most public charities are eligible to receive QCDs, private foundations, donor advised funds and split interest gifts (for example, charitable remainder trusts or charitable lead trusts) are not. Talk to your financial or tax adviser to see if this option is appropriate for you.