EDITORIAL: “Government Makes It Easier to Be Charitable” by Christian Maher
The primary purpose of the recently authorized Emergency Economic Stabilization Act of 2008 is to “bailout” the troubled financial services industry. It will take time for the effect on the economy to be known. However, one small provision of the legislation will have an immediate, positive impact. The new law extends for two years the ability of persons age 70 ½ to make charitable gifts from an individual retirement account (IRA) directly to charity.
Charitable IRA rollovers were first authorized in the Pension Protection Act of 2006. More than $130 million was given in this manner through December 31, 2007.
Gifts can be made to recognized public charities from traditional and Roth IRAs. (Other retirement plans such as 401(k) and 403(b) annuities are not eligible.) As much as $100,000 per year can be given tax-free. The IRS treats IRA distributions to charity as non-reportable events. They are not added to taxable income and therefore may not be deducted from income. Most people will fare better from a tax standpoint by using this method of giving.
Before this legislation was renewed, making a gift with these assets required accepting a distribution from the IRA and then giving it to charity. You may wonder why that is a problem? Because, by taking the money first, the donor increases their taxable income and probably increases their year-end tax bill. This is especially likely for people who do not itemize their deductions or who do itemize but exceed the deductibility limits prescribed by law.
The Crawford Heritage Foundation, the nonprofit community foundation serving Crawford County, is dedicated to helping people get the most from their philanthropic giving. There is added benefit in giving through a community foundation. Donors may direct their support through a foundation to the programs they care most about. The money they give is permanently invested. Each and every year—forever—a percentage is used to achieve the charitable purpose they specified. Much more than the original gift amount will be awarded in their name over the course of time.
The nonprofit community is continuing to lobby for additional changes to the rules regarding charitable gifts using retirement assets. In the future, we hope that this legislation will be made permanent and that it will be expanded to other types of retirement assets. Please contact your federal legislators to voice your support for these efforts. And, if you’re eligible, discuss using IRA assets for charitable giving with your financial advisor. Or, contact the Crawford Heritage Foundation for more ways to make the most of your philanthropy.